In a 2-1 ruling, the Ninth Circuit became the second federal court of appeals to agree with the National Labor Relations Board’s (NLRB) position that the National Labor Relations Act (NLRA) prohibits class action waivers in employees’ arbitration agreements.
Writing for the majority in Morris v. Ernst & Young, Chief Judge Sidney Thomas held that Ernst & Young’s arbitration agreement violated Sections 7 and 8 of the NLRA by requiring its employees to arbitrate work-related claims in “separate proceedings.”
Plaintiffs Stephen Morris and Kelly McDaniel formerly worked at Ernst & Young. As a condition of employment, they signed arbitration agreements that included a “concerted action waiver.” The waiver required employees to pursue claims exclusively through arbitration and only as individuals in “separate proceedings.” Despite signing the agreement, Morris and McDaniel subsequently brought a class and collective action in federal court, alleging that the company misclassified its employees in violation of the Fair Labor Standards Act. Pursuant to the arbitration agreement, Ernst & Young moved to compel individual arbitration. The federal district court agreed and dismissed the case. The plaintiffs appealed to the Ninth Circuit.
Citing the NLRB’s position regarding the unenforceability of class action waivers and the Seventh Circuit’s recent decision in Lewis v. Epic Systems Corp. striking down a class waiver (discussed previously here), the Ninth Circuit concluded that Ernst & Young’s concerted action waiver violated the NLRA and could not be enforced. Continue Reading