Articles from Pacific Northwest Law Group

Mandatory Arbitration Provisions and Class Action Waivers
Feb 18, 2016

Include Arbitration in Employee Agreements.  Companies seeking to save money and avoid litigation are increasingly turning to the inclusion of mandatory arbitration provisions and class action waivers in their employee agreements.  Mandatory arbitration provisions require employees to address their complaints about working conditions or other issues with an arbitrator as opposed to traditional litigation in the state or federal courts.  Class action waivers require employees to bring their claims individually, as opposed to bringing claims as a group.  Mandatory arbitration provisions and class action waivers can be cost, time, and reputation saving for a company.  They are worthy of consideration for inclusion in employee agreements.    

Supreme Court Upholds Use.  A 2011 U.S. Supreme Court ruling upheld the use of such arbitration (over lawsuit alternative) required resolution provisions in employee offer letters and agreements.  The result has been a noticeable decline in actions that accuse corporations of wage theft, discrimination, and other systemic violations of labor laws.

Faster, Less Public, Less Expensive.  Arbitration is a form of alternative dispute resolution.  The rules of arbitration can be set forth in the employee agreement, or the rules of a nationwide arbitration service may be used (by referring to the same in the agreement).  The arbitration process often still involves attorneys for both parties.  The arbitrator is usually a former judge or attorney that listens to both sides and makes a decision.  The professionalism of an arbitrator can serve as an additional benefit to companies including an arbitration provision, because they can guarantee that the dispute will be heard by a legal professional, and not a jury of laymen.  In most cases the arbitration will be binding, meaning that the decision of the arbitrator is final, and no appeal is permitted. 

Include Class Action Waiver.  A class action is a lawsuit filed by an employee or small group of employees acting on behalf of a larger group of employees with similar complaints.  As these suits include large numbers of employees, the damages can be relatedly large.  Both the size of the class and the size of the potential damages can lead to these actions garnering a lot of publicity.  Many companies hope to avoid this unwelcome attention.  Including a class action waiver in their employee agreements is one way to do so.  It has been supported by the U.S. Supreme Court in AT&T Mobility v. Concepcion.

       If a class action waiver is in place, employees are required to address their grievances individually.  In many cases, this makes for a more efficient and less-public process for addressing employee complaints.

NLRB Overruled on This Matter.  Perhaps unsurprisingly, the National Labor Relations Board (“NLRB”) has ruled against class action waivers, stating that they violate the National Labor Relations Act.  However, federal circuit courts have ruled against the NLRB and upheld the waivers.  While these types of disagreements are likely to continue, class action waivers are currently enforceable.

      Some companies with mandatory arbitration provisions or class action waivers allow their employees to opt out of such clauses.  These companies often require employees seeking to opt out to take additional steps (beyond merely checking “No”) in order to do so.    

      If you would like to speak with a business law attorney about mandatory arbitration provisions, class action waivers, or any other business law matter, please contact our Redmond law firm today.  

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