The Enforceability of Class Action Waivers in Arbitration Clauses - Dispute Resolution Journal - Vol. 64, No. 3
Thomas W.H. Barlow is a partner in the Detroit office of Jackson Lewis LLP. A labor and employment lawyer, he has more than 36 years of experience representing management in the negotiation and administration of collective bargaining agreements and in defending management in discrimination, harassment, wrongful dismissal, Sarbanes-Oxley, whistle-blowing, and retaliation cases. Daniel D. Schudroff, an associate in Jackson Lewis’s New York City office, helped prepare this article.
Originally from Dispute Resolution Journal
Employers are increasingly including in their arbitration agreements a provision waiving the right to bring class action claims in arbitration. The case law regarding the enforceability of class action waivers in the employment context is relatively sparse. There is more case law on this issue in the consumer arena. This article addresses the issues surrounding class action waivers and proposed legislation that would make this issue moot by making arbitration agreements in the employment setting unenforceable.
With the enforceability of arbitration agreements established in the labor and employment arena, even with respect to statutory discrimination claims, employers are fighting efforts by employees to bring collective claims in arbitration. The main tool employers are using is a provision waiving the right to bring a class or collective arbitration. Should courts enforce such waivers? Some proponents of class arbitration waivers argue that employees ought to be able to waive a procedural right in exchange for the benefits of arbitration; others argue that class arbitration waivers make it impossible to bring low-value claims to the arbitral forum because arbitration costs (if the employer is not required to pay them) and the employee’s attorney fees could exceed the potential recovery, thereby depriving the employee of his or her substantive rights. On the other hand, if the whole point of a collective action is to help people bring meritorious claims despite financial barriers, does affordable access to arbitration accomplish this goal, making class proceedings unnecessary?
The presumption in the Federal Arbitration Act (FAA) is that arbitration agreements will be “valid, irrevocable, and enforceable” unless a generally applicable, state law contract defense would apply. Thus, to be enforceable, the contract—including any class arbitration waiver—must not violate state contract law.