Employment Law Observer

In the spirit of the season, we are using our annual "12 days of the holidays" blog series to address new California laws and their impact on California employers. On the seventh day of the holidays, my labor and employment attorney gave to me seven swans-a-swimming, and SB 365.

In the spirit of the season, we are using our annual "12 days of the holidays" blog series to address new California laws and their impact on California employers. On this second day of the holidays, my labor and employment attorney gave to me: two turtle doves and SB 762.

The United States Court of Appeals for the Seventh Circuit recently articulated a new statutory framework for determining whether notice to a putative plaintiff should be issued under the Fair Labor Standards Act (FLSA). At issue was whether a district court may authorize notice to potential plaintiffs who had entered into arbitration agreements waiving the right to participate in a collective action; or in the alternative, whether these employees are “similarly situated” to a plaintiff that has not waived their right to participate in a collective action.

On January 1, 2020, new arbitration procedures for the American Arbitration Association (AAA) with respect to withdrawal liability assessments will go into effect. It is not uncommon for employers—and a good many labor lawyers—to think that the Employee Retirement Income Security Act of 1974's (ERISA) provisions regarding withdrawal liability are among the most "unfair" laws they have to contend with. However, changes to the arbitration fee structure and fee allocation rules will give employers some relief.

The National Labor Relations Board (NLRB) recently provided guidance in Cordúa Restaurants, Inc., 368 NLRB No. 43, for employers seeking to require employees to sign class action and collective action waivers in arbitration agreements when facing litigation. By way of background, the U.S. Supreme Court previously held in Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), that agreements containing class action and collective action waivers, and provisions stipulating that employment disputes be resolved by individualized arbitration, do not violate the National Labor Relations Act. As a result, the Court held that these agreements must be enforced as written to follow the Federal Arbitration Act (the "Act"). In Cordúa Restaurants, the NLRB was faced with two issues of first impression in the post-Epic Systems era: (1) whether the Act prohibits employers from circulating such agreements in response to employees opting in to a collective action; and (2) whether the Act prohibits employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement. The NLRB held that both actions were consistent with Epic Systems and were not forbidden under the Act. The Cordúa Restaurants decision provides significant opportunity for employers to revise arbitration agreements to preclude participation in these multi-party litigations and require that employees sign these agreements.

Last year, the U.S. Supreme Court (SCOTUS) handed employers a major win in Epic Systems v. Lewis, when it ruled that employees must submit claims to arbitration on an individualized basis when their employment agreements require it, even when those claims could be brought as class or collective action under federal legislation. More recently, in Lamps Plus Inc. et al. v. Frank Varela, SCOTUS addressed the issue of whether a worker can pursue class arbitration when an arbitration agreement does not explicitly address class arbitration. By a 5-4 vote, the court said class arbitration is also barred in such circumstances, holding that "[u]nder the Federal Arbitration Act, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration[.]"

The United States Supreme Court recently handed workers a rare victory in New Prime Inc. v. Oliveira. The Supreme Court ruled that transportation workers engaged in interstate commerce—including those labeled as independent contractors—are exempt from the Federal Arbitration Act (FAA) and thus cannot be compelled to undergo mandatory arbitration.  As a result of this decision, employers in the transportation industry will have to review their existing arbitration policies and assess whether or not they comply with applicable local, state, and federal laws.

On August 22, 2018, California senators passed a bill that prevents employers from forcing employees to sign mandatory arbitration or nondisclosure agreements in order to secure and/or maintain employment.  AB 3080 prevents retaliation against workers who choose not to sign mandatory arbitration agreements that would waive their right to pursue legal action under the state’s Fair Employment and Housing Act or the California Labor Code in courts.  The intent of the bill is not to outlaw arbitration agreements in their entirety, but to provide workers and job applicants with the option to choose the forum in which to air out their grievances. The proposed legislation will now move to the desk of Governor Brown for final approval. 

The United States Supreme Court ruled earlier this week that employees must submit claims to arbitration on an individualized basis when their employment agreements require it, even when those claims could be brought as class or collective action under federal legislation such as the Fair Labor Standards Act. Writing for the majority, Justice Neil Gorsuch held that parties to an arbitration agreement are bound by their agreement, as the Federal Arbitration Act envisioned. The Court cited the long history of supporting private arbitration agreements as an efficient and cost-effective means of handling disputes between parties, including parties to an employment agreement who have a dispute over wages.

On Tuesday of this week, a federal judge in Texas granted a nationwide preliminary injunction blocking the portions of President Obama's "Fair Pay and Safe Workplaces" Executive Order. 

On September 3, Judge Richard Berman of Southern District of New York overturned the NFL's four-game suspension of New England Patriots’ quarterback Tom Brady.  Besides being a dream come true for ESPN, the ruling is quite significant from a labor and employment law perspective, as the judge drastically departed from courts' typical deference to arbitration awards and unwillingness to interfere with the language in collective bargaining agreements.

In recent years, the courts and state legislatures across the country have been interpreting and enforcing laws regarding arbitration more strictly. What this means is that a lot of existing arbitration agreements no longer pass muster and must be revised in order to be compliant with the ever-changing laws. In this particular case, the employee's agreement to arbitrate employment disputes stood up, and it was because the employer had the right language in its policy documents. Read on.

We thought we'd heard everything! This is a new one, that's for sure. It's no secret that employees try to wiggle out of arbitration agreements all of the time. There are the usual digs: the agreement was buried in the middle of the documents, the font was too small, it didn't have the magic words, it requires the splitting of fees, etc. This case presents an entirely different type of argument, however. As demonstrated more fully below, in this case, the federal district court in California agreed with an employee that he was not bound by the arbitration agreement that he previously executed when he was a minor.

When three Walt Disney World performers complained that their "Lion King" character costumes were too dirty to wear for their upcoming performance they were fired last summer, but an arbitrator has now ordered their reinstatement with back pay.  

Not surprisingly, a court has found that employers should probably not present (and potentially force execution of) important legal documents to employees while they are mostly naked.  This shouldn't be too much of a stretch for most employers, but the reasoning behind the court's ultimate decision could have more far-reaching implications for all employers.

Employers must always be careful when adding an arbitration clause to an existing employment agreement. The amendment process becomes even trickier when the employment relationship is governed by multiple documents.That was the situation in Sharpe v. AmeriPlan, where the Fifth Circuit analyzed whether an arbitration provision that an employer added to one contract could be harmonized with provisions in two other contracts that defined the employment relationship.

Today, the California Supreme Court issued its opinion in Sonic-Calabasas A, Inc. v. Moreno, No. S174475 (October 17, 2013), holding that the Federal Arbitration Act preempts California's rule categorically prohibiting waiver of a Berman hearing in a pre-dispute arbitration agreement imposed on an employee as a condition of employment.

In this recent arbitration decision out of the Ninth Circuit, the employee brought an action against her employer, alleging violations of California’s overtime laws and sought to assert claims on behalf of a class. After several years of litigation, the employee moved to certify a class. The District Court granted the motion in part, narrowing the class which the employee represented. In the same order, the court denied the employer's motion to compel arbitration, which was after the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). The District Court found that the employer had waived its right to arbitration by litigating the action for years without raising the binding arbitration clause contained in the employee's employment agreement.

A tile installation company employed union workers. Certain customers of the company request non-union employees in order to obtain cheaper labor. As a result, the owners of the company started a second company which employed only non-union employees. The union filed a grievance, seeking union benefits for the employees at this new company. The joint arbitration committee granted the union’s request, which prompted the companies to file a motion in federal district court seeking to vacate the award. The union also filed a motion for summary judgment, seeking to enforce the award. The owners argued that the new company was not subject to the collective bargaining agreement and thus should not be bound by the arbitration award. The district court granted the union’s motion to enforce the award on the grounds that under the “single employer” doctrine, the companies were treated as one and the same. The companies appealed, but the Seventh Circuit Court of Appeals affirmed the district court’s ruling. The Court of Appeals concluded that the two companies were centrally operated by the same entity, and were thus one and the same for purposes of arbitrability under the contract.

One U.S. Supreme Court decision has not received great attention from the media, but it may have considerable impact on how employers structure their relationships with employees. In this instance, the issue is what authority does an arbitrator have to interpret contractual terms so as to provide for class arbitration. Justice Kagan, without dissent, explained that the Court viewed arbitration clauses that provide for all civil actions to be arbitrated as giving arbitrators the authority to find a contractual basis to support class arbitration.