Are Arbitration Agreements Necessary for Class-Action Waivers To Be Enforceable?
Much ink has recently been spent on the Supreme Court’s May 2018 decision on the enforceability of class-action waivers in arbitration agreements. In a 5-4 decision, the Supreme Court in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1620 (2018), added another opinion to its pro-arbitration jurisprudence and settled an argument that had been recently gaining steam in the context of employment agreements containing arbitration provisions and class-action waivers. The Epic Systems plaintiffs argued that §7 of the National Labor Relations Act (NLRA) guaranteed a right to class or collective procedures by virtue of its protection of concerted activity, so any arbitration agreement with a class-action waiver violated §7.1 The Supreme Court concluded, however, that “[n]othing in our cases indicates that the NLRA guarantees class and collective action procedures.”2
Epic Systems involved a class-action waiver3 in an arbitration agreement, but the reasoning of the decision indicates that §7 does not protect class-wide procedures at all, regardless of whether an arbitration agreement is involved. For employers, thisdecision raises the question of whether, contrary to popular belief, an arbitration agreement is required to enforce a class-action waiver. Although many employers may be well-advised to consider implementing class-action waivers, arbitration is not a one-size-fits-all solution, and not every employer wants to resolve employment disputes via arbitration.
This article briefly reviews the importance of class-action waivers, the history of their development, and the potential pitfalls of arbitration. Then it examines whether standalone class-action waivers in employment agreements would be enforceable in Florida.
The Need for Class-Action Waivers
It may be self-evident why employers would be interested in requiring their employees to sign class-action waivers: Class actions can be extraordinarily expensive. A recent survey indicates spending on class actions is set to hit $2.39 billion this year and shows no signs of slowing down.4 Indeed, spending on the defense of class action lawsuits is up for the third year in a row in 2018.5 Of the companies surveyed, some 59 percent faced some kind of class-action proceeding. Of those proceedings, labor and employment cases made up the largest share,6 with wage and hour claims in particular making up a large share of labor and employment class actions.7 It is no wonder why more employers are requiring their employees to sign class-action waivers.8
The Arbitration Agreement as the Vehicle for the Class-Action Waiver
Conventional wisdom posits that such class-action waivers must be presented to employees using the vehicle of an arbitration agreement. This may be because, perhaps counterintuitively, the popularity of the arbitration agreement came first.9 The trend of including class-action waivers within arbitration agreements did not emerge until around the late 1990s,10 when trade-journal articles began to appear suggesting arbitration agreements could be used to shield corporations from class-action litigation.11 this time, there had already been a move in the courts toward enforcing arbitration agreements.12
The growing popularity of arbitration agreements with class-action waivers among employers was met with waves of challenges to their enforceability; so far, none of these challenges have had any widespread or lasting success.13 As one arbitration-skeptical scholar put it, “corporate lawyers created the [class-]action waiver and wrapped their newborn in the cloak of an arbitration clause, protecting it against attack with the now sacrosanct policies of the [Federal Arbitration Act (FAA)].”14
As a result, the proportion of American workers subject to mandatory arbitration agreements, which include class-action waivers, has vastly increased. In 26 years, the proportion of workers subject to mandatory arbitration agreements has grown from around 2 percent in 1992 to more than 55 percent in 2018. Of the employers who use mandatory arbitration agreements with their employees as of 2018, roughly 30 percent include a class-action waiver in their arbitration agreements.15
Arbitration Agreements: Not Necessarily Desirable
As reliable as enforcement of class-action waivers in arbitration agreements is, not every employer prefers arbitration over litigation. Proponents of arbitration often claim arbitration is simpler, less formal, and more flexible than litigation in the court system.16 Indeed, some studies indicate arbitration can be concluded in a fraction of the time litigation would take.17 But many of arbitration’s purported advantages can cut both ways. For example, it is extremely difficult to successfully vacate the final decision in a binding arbitration — in the event of an unfavorable result for the employer, such result is often permanent.18 Employers may also be in for a sour surprise when they first learn about the variety of fee structures for employment arbitration. Arbitration, while frequently touted as being less expensive than litigation, requires high initial filing fees as compared to litigation. Arbitration also requires costs not incurred during litigation, such as the arbitrator(s’) compensation and expenses.19 Some employment arbitration fee schedules, including the American Arbitration Association’s, allocate most of these costs to the employer.20
Arbitration Agreements: Not Necessarily Necessary?
So, must employers desiring protection from class actions use arbitration agreements in order to impose enforceable class-action waivers? Maybe not.
The caselaw addressing standalone class-action waivers is dwarfed by the caselaw addressing class-action waivers within arbitration agreements, perhaps because the trend toward requiring class-action waivers occurred after the trend toward arbitration agreements. However, the reasoning behind many of the arguments in support of enforcing class-action waivers in arbitration agreements should also apply in favor of enforcing standalone waivers. The two major categories of attacks on class-action waivers in arbitration agreements are 1) attacks based on the doctrine of unconscionability; and 2) attacks based on the premise that particular statutes confer a substantive, nonwaivable right to class-wide proceedings.21
• Unconscionability —In Florida, a party seeking to assert the defense of unconscionability must show both procedural and substantive unconscionability.22 An analysis of procedural unconscionability implicates, for example, an imbalance in bargaining power between the parties, the parties’ ability to understand or review the contract, or the presence or absence of “meaningful choice” in the parties’ decision to enter the contract.23 Substantive unconscionability exists when a contract or its terms are “so outrageously unfair as to shock the judicial conscience” such that “no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.”24 The two prongs of an unconscionability analysis are weighed against one another on a sliding scale. Thus, although both procedural and substantive unconscionability must exist for the defense to succeed, they “need not be present in the same degree….[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”25
The argument that class-action waivers within arbitration agreements are unconscionable, and, therefore, unenforceable, has met with limited success in Florida. There is no blanket rule holding such waivers are per se enforceable, whether contained within an arbitration agreement or not. It depends on the circumstances. In cases in which the facts include, for example, a failure to allow one party to fully review and retain a copy of the agreement, coercion, or pressure into signing the agreement, prevention of one party from understanding the agreement, or a roll-out of an agreement containing a class-action waiver after a class-action is threatened or has been initiated, courts may be more likely to find procedural unconscionability.26
But when, for example, the terms of the agreement are clear, employees are given reasonable time to review and assent to the class-action waiver in the arbitration agreement, and especially when they are given the opportunity to opt out of the arbitration agreement, courts may be reluctant to find procedural unconscionability.27 Although there is an inherent inequality in bargaining power between employees and employers, that alone is not sufficient to constitute procedural unconscionability.28 Neither is the fact that the agreement is presented on a take-it-or-leave-it basis,29 nor even that the employee is not fluent in the language in which the agreement is written.30If there is no procedural unconscionability, then the inquiry into unconscionability ends, as both forms of unconscionability are required to avoid the arbitration agreement.31
Substantive unconscionability may be found when “the disputed terms limit available remedies, exclude punitive damages, prevent equitable relief, impose substantial costs, or lack mutuality of obligation with respect to the arbitration of disputes.”32 For example, agreements that have limited claimants’ ability to recover attorneys’ fees or punitive damages have been found substantively unconscionable.33 But when an agreement allows claimants to vindicate their substantive rights, courts are less likely to find substantive unconscionability.34
Crucially, a restriction on an employee’s ability to bring claims as a part of a class does not, standing alone, constitute substantive unconscionability.35 For example, in Korea Week, Inc. v. Got Capital, LLC, 2016 WL 3049490, at *6 (E.D. Pa. May 27, 2016), the courtconstrued unconscionability standards similar to Florida’s36 and found standalone class-action waivers in the commercial context were not substantively unconscionable.37 The court reasoned:
“In [American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304, (2013)], decided two years after [AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)], the Supreme Court considered ‘[w]hether the [FAA] permits courts. . . to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.’ The Court held the FAA does not permit courts to do so, finding Rule 23 does not ‘establish an entitlement to class proceedings for the vindication of statutory rights.’ Class action waivers ‘merely limi[t] arbitration to the two contracting parties. It no more eliminates those parties’ right to pursue their statutory remedy than did federal law before its adoption of the class action for legal relief….Or, to put it differently, the individual suit that was considered adequate to assure “effective vindication” of a federal right before adoption of class-action procedures did not suddenly become “ineffective vindication’ upon their adoption.” We do not find the identical class action waiver in a financing contract between two businesses is substantively unconscionable. Plaintiffs do not lose any statutory right to pursue their damages under RICO.”38
In light of the weight of authority in Florida and the 11th Circuit categorizing the right to class actions as a procedural right, not a substantive right,39 it is unlikely a Florida court would invalidate an employer’s class-action waiver for substantive unconscionability based solely on the fact that it restricted an employee to individual procedures.40 Based on courts’ treatment of class-action waivers within arbitration agreements, it is more likely that courts would treat class-action waivers without arbitration agreements “like many other contractual terms” as “proper subjects for contractual bargaining because there is no substantive right associated with class action litigation.”41 Thus, it seems likely that as long as the particular features of a class-action waiver were not unconscionable, the waiver would not be unenforceable.
• Class Action as a Substantive, Nonwaivable Right —Another challenge commonly made against class-action waivers within arbitration agreements is that the right to class action is a substantive right employees cannot be forced to waive by their employers.42 But courts have largely decided that the right to class-wide proceedings is a procedural right, not a substantive right — one that can be waived.43 This is true across a number of statutory schemes permitting class action.44
In the case of a standalone class-action waiver, at least one circuit court has found that a class-action waiver is not enforceable without the “countervailing federal policy” in favor of liberally enforcing arbitration agreements. In Killion v. KeHE Distributors, LLC, 761 F.3d 574, 592 (6th Cir. 2014), the Sixth Circuit found that without such a counterweight, a standalone class-action waiver was not enforceable because plaintiffs could not be forced to waive the right to class-wide procedures.45
The Killion court acknowledged its decision regarding waiver of the procedural rights to collective action ran contrary to the growing consensus among the other circuits.46 In fact, as the Killion court specifically noted, the 11th Circuit has concluded there is no nonwaivable, substantive right to class-wide procedures.47 Additionally, at least one court within the 11th Circuit has noted that “[t]he validity of a class-action waiver has nothing to do with the advantages of arbitration or some sort of trade-off. Instead, class-action waivers are upheld because they are contractual provisions that do not affect any substantive rights.”48
To the extent courts outside of Florida have examined standalone class-action waivers, most have come to the opposite conclusion of Killion, holding that just as in the context of arbitration agreements, class-action waivers outside of arbitration agreements do not require the waiver of a substantive right and are enforceable.49 Thus, the existing position of the courts in Florida regarding the procedural nature of the right to class-wide proceedings, along with the small but growing number of cases deciding that standalone class-action waivers are enforceable, indicate Florida employers may be able to successfully require their employees to waive the right to class-wide action without including such a waiver in an arbitration agreement.
Conclusion
In light of the underlying reasoning of the ever-increasing body of caselaw enforcing arbitration agreements containing class-action waivers, it appears likely that standalone class-action waivers would be just as enforceable as their arbitration-agreement cousins. This may provide an option for employers seeking to avoid both class actions and the potential pitfalls of arbitration.
1 Epic Systems, 138 S. Ct.at 1620.
2 Id. at 1628.
3 Much of the authority addressing class actions also refers or relates to collective actions under §216(b) of the Fair Labor Standards Act (FLSA). For the purposes of this article, class-action and collective-action waivers will be treated the same way. Therefore, the term “class-action waiver” in this article refers to both class- and collective actions. Additionally, the term “standalone class-action waiver” in this article refers to class- or collective-action waivers that appear outside of an arbitration agreement.
4 Carlton Fields Jorden Burt, P.A., The 2018 Carlton Fields Class Action Survey, Classactionsurvey.com, https://classactionsurvey.com/ [hereinafter, CF Survey].
5 Id.; see also Mark A. Knueve, Dollars, Details Behind Surge in Wage-and-Hour Class Actions, 2007 WL 2064105, at *4 (2007).
6 CF Survey.
7 Risk Placement Services, Employment Practices: The Rise of Wage & Hour Class-Action Suits, Settlements, RPSINS.com (Mar. 13, 2018), https://www.rpsins.com/knowledge-center/items/employment-practices-the-rise-of-wage-hour-class-action-suits-settlements/ (citing to Seyfarth Shaw’s 800+ page annual report on class-action litigation and noting that “growth in wage-and-hour settlements, which rose during the past two years to a combined value of $1.2 billion, is the number-one exposure for corporations for 2018”). Employers have picked up on the disproportionate number of wage and hour class actions, and these claims are reported to be causing employers the most concern. CF Survey.
8 CF Survey; Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration, Econ. Pol. Inst. (Apr. 6, 2018), available at https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.
9 J. Maria Glover, Beyond Unconscionability: Class-Action Waivers and Mandatory Arbitration Agreements, 59 Vand. L. Rev. 1735, 1746 (2006).
10 Id. at 1746; Myriam Gilles, Opting Out of Liability: The Forthcoming, Near-Total Demise of the Modern Class Action, 104 Mich. L. Rev. 373, 396 (2005).
11 See, e.g., Edward Wood Dunham, The Arbitration Clause as Class Action Shield, 16 Franchise L. J. 141 (1997).
12 See, e.g., Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)(finding as early as 1983 that the FAA established “a liberal federal policy favoring arbitration agreements”).
13 See Gilles, Opting Out of Liability: The Forthcoming, Near-Total Demise of the Modern Class Action, 104 Mich. L. Rev. at 396.
14 Id.
15 Colvin, The Growing Use of Mandatory Arbitration, Econ. Pol. Inst. (Apr. 6, 2018).
16 See, e.g., Epic Sys. Corp., 138 S. Ct. at 1620 (noting the “relative simplicity and informality of resolving claims before arbitrators”).
17 Edna Sussman & John Wilkinson, Benefits of Arbitration for Commercial Disputes, American Bar Association (Mar. 2012), available at https://www.americanbar.org/content/dam/aba/publications/dispute_resolution_magazine/March_2012_Sussman_Wilkinson_March_5.authcheckdam.pdf (“According to statistics of the American Arbitration Association (‘AAA’) for the year 2008, the median length of time from the filing of an arbitration demand to the final award in domestic, commercial cases was just 7.9 months. contrast, in 2010, the median length of time from filing through trial of civil cases in the U.S. District Court for the Southern District of New York was 33.2 months. The median length of time in 2010 from filing of a civil case in lower court to disposition of appeal by the Second Circuit Court of Appeals was 40.8 months.”).
18 In the 11th Circuit, “all non-statutory bases for vacating arbitration awards” have been rejected, “including manifest disregard of the law.” Dunn v. Citigroup Glob. Markets, Inc., 2011 WL 13227889, at *2 (S.D. Fla. July 15, 2011). In Florida courts, the vacation of arbitration awards is governed by statute. Fla. Stat. §682.13(1). Section 682.13(1) provides that “[u]pon motion of a party to an arbitration proceeding, the court shall vacate an arbitration award if” a limited number of circumstances exist, such as if “[t]here was no agreement to arbitrate” in the first place or “[a]n arbitrator exceeded the arbitrator’s powers.” Id. An arbitrator exceeds his powers when “he or she goes beyond the authority granted by the parties or the operative documents and decides an issue not pertinent to the resolution of the issue submitted to arbitration.” Boardwalk Properties Mgmt., INC. v. Emerald Clinton, LLC, 234 So. 3d 786, 788 (Fla. 4th DCA 2017).
19 See, e.g., American Arbitration Association, Employment/Workplace Fee Schedule: Costs of Arbitration (Oct. 17, 2017), https://www.adr.org/sites/default/files/Employment_Arbitration_Fee_Schedule.pdf. Additionally, arbitration is sometimes conducted before a panel of three arbitrators rather than one. In such matters, arbitrator compensation and expenses may be tripled. Id.
20 Id.
21 See Gilles, Opting Out of Liability: The Forthcoming, Near-Total Demise of the Modern Class Action 104 Mich. L. Rev. at 396. Another category of attacks has emerged based on the effective vindication doctrine. Id.; see generally Robert Ward, Divide & Conquer: How the Supreme Court Used the Federal Arbitration Act to Threaten Statutory Rights and the Need to Codify the Effective Vindication Rule, 39 Seton Hall Legis. J. 149, 153-54 (2015). The effective vindication doctrine states that “so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.” Randolph v. Green Tree Fin. Corp. Alabama, 244 F.3d 814, 817 (11th Cir. 2001). There is some overlap between this doctrine and the other inquiries addressed above. See Ward, Divide & Conquer at 153-54. But this doctrine relates to the body of caselaw specifically dealing with arbitration agreements and the appropriateness of the arbitral forum for disposition of statutory claims which may (or may not) be in conflict with the FAA. See Randolph, 244 F.3d at 818. As such, it has limited applicability to class-action waivers that do not appear in arbitration agreements. To the extent that questions of effective vindication do apply to class-action waivers, they are addressed (below) within the other sections regarding unconscionability and substantive, nonwaivable rights. In any case, the Middle District of Florida has found in the context of a class-action waiver in an arbitration agreement that, “at least as to federal statutes that, like the FLSA, provide for enforcement by administrative agencies, so long as a plaintiff can effectively vindicate his substantive statutory rights through individual arbitration, his inability to proceed collectively or on behalf of a class is generally irrelevant.” Delano v. Mastec, Inc., 2010 WL 4809081, at *3 (M.D. Fla. Nov. 18, 2010) (emphasis added) (collecting and analyzing cases). A plaintiff’s ability to proceed individually or as part of a class should likewise be irrelevant to his ability to vindicate his rights in litigation, as (arguably) originally intended.
22 Woebse v. Health Care & Ret. Corp. of Am., 977 So. 2d 630, 632 (Fla. 2d DCA 2008).
23 Basulto v. Hialeah Auto., 141 So. 3d 1145, 1159 (Fla. 2014). See also Woebse, 977 So. 2d at 632.
24 Id.
25 Basulto, 141 So. 3d at 1159 (quoting Romano ex rel. Romano v. Manor Care, Inc., 861 So. 2d 59, 62 (Fla. 4th DCA 2003)).
26 See Abdul-Rasheed v. KableLink Commc’ns, LLC, 2013 WL 6182321, at *4 (M.D. Fla. Nov. 25, 2013) (employees pressured daily to sign agreements which were introduced after class action had already been initiated); SA-PG Sun City Ctr., LLC v. Kennedy, 79 So. 3d 916, 920 (Fla. 2d DCA 2012); see also Evering v. Tampa Food & Hosp., Inc., 2016 WL 8943314, at *3 (M.D. Fla. Aug. 4, 2016) (collecting cases).
27 In fact, some authority suggests that including an opt-out provision in an agreement is essentially a get-out-of-jail-free card with regard to procedural unconscionability. Lamour v. Uber Techs., Inc., 2017 WL 878712, at *14 (S.D. Fla. Mar. 1, 2017) (“Under similar circumstances, courts have held [a worker with the option to opt out] is “free not to arbitrate,” and, in declining that opportunity, the worker makes the choice to arbitrate his or her potential claims. Accordingly, because the [a]rbitration [p]rovision was freely accepted by [p]laintiff when he had sufficient time to consider it and the unfettered right to reject it, there can be no finding of procedural unconscionability and no finding of unconscionability under Florida law.” (collecting cases)). See, e.g., Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1377 (11th Cir. 2005) (terms clear, presented to employees with explanatory cover letter, no oppressive terms); Lopez v. MasTec, Inc., 2010 WL 11553321, at *4 (S.D. Fla. Oct. 4, 2010) (agreement was not confusing, employees not rushed to sign agreements and had the opportunity to opt out).
28 Caley, 428 F.3d at 1377.
29 Evering, 2016 WL 8943314, at *3.
30 La Torre v. BFS Retail & Commercial Operations, LLC, 2008 WL 5156301, at *4 (S.D. Fla. Dec. 8, 2008).
31 Lamour, 2017 WL 878712 at *14; Evering, 2016 WL 8943314 at *4; Spring Lake NC, LLC v. Beloff, 110 So. 3d 52, 55 (Fla. 2d DCA 2013).
32 Sierra, 2009 WL 2179127 at *4.
33 E.g., Abdul-Rasheed, LLC, 2013 WL 6182321 at *4; Romano, 861 So. 2d at 63. Additionally, in circumstances in which a plaintiff can show a likelihood that the costs of individually pursuing his or her claims will be prohibitive, some courts have found substantive unconscionability. See, e.g., Lamour, 2017 WL 878712 at *15; Powertel, Inc. v. Bexley, 743 So. 2d 570, 576 (Fla. 1st DCA 1999) (finding substantive unconscionability in context of consumer agreement where consumer’s individual claims would be too small to litigate individually). But as the 11th Circuit pointed out in Dale v. Comcast Corp., 498 F.3d 1216, 1222-23 (11th Cir. 2007), the potential recovery of attorneys’ fees and costs under many employee-protection statutes creates an incentive for plaintiffs’ attorneys to take such cases on an individual basis and makes it much less likely that an individual plaintiff will be foreclosed from bringing his or her claim because of the prohibitive costs of litigation, thus, decreasing the likelihood that a court would find substantive unconscionability in a class-action waiver in an employment context.
34 See, e.g., Jenkins v. First Am. Cash Advance of Georgia, LLC, 400 F.3d 868, 878 (11th Cir. 2005) (agreement with class-action waiver not substantively unconscionable where plaintiffs could vindicate their substantive rights); Sierra v. Isdell, 2009 WL 2179127, at *5 (M.D. Fla. July 21, 2009) (no substantive unconscionability where an arbitration agreement “preserve[d] all substantive rights available to the party” (emphasis added)).
35 See, e.g., Lopez, 2010 WL 11553321 at *4 (noting that plaintiff did not “cite to a single case which holds that FLSA collective action waivers are substantively unconscionable” and naming none, while collecting cases indicating class-action waivers are not substantively unconscionable).
36 Korea Week applied Pennsylvania and New York standards. These standards are similar to Florida standards in that they both (generally) require procedural and substantive unconscionability. But in Pennsylvania, substantive unconscionability requires only “unreasonably or grossly unfavorable” terms to one side, and New York only requires “grossly unreasonable [terms] in the light of the mores and business practices of the time and place” to be substantively unconscionable. Id. at **7-8. Neither state requires terms that are “so outrageously unfair as to shock the judicial conscience” that “no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.” Woebse, 977 So. 2d at 632. Thus, Florida’s unconscionability standard is arguably harder to meet than Pennsylvania’s or New York’s.
37 In dicta, the court allowed for the possibility that they could be unconscionable in the consumer or employment context, Korea Week, 2016 WL 3049490 at *9, but as discussed in note 32, the applicable standards in that case may be lower than the Florida standard.
38 Korea Week, 2016 WL 3049490 at **9-10.
39 Discussed in more detail in Part B below.
40 See Palmer v. Convergys Corp., 2012 WL 425256 at *3 (M.D. Ga. Feb. 9, 2012) (construing Georgia’s law of unconscionability, which is similar to Florida’s, and holding that standalone class-action waiver was not unconscionable); Lopez, 2010 WL 11553321 at *4 (noting that plaintiff could identify no Florida cases holding collective action waivers unconscionable, and collecting cases that found them enforceable in the context of arbitration agreements); see also Korea Week, 2016 WL 3049490 at **9-10 (standalone class-action waiver not unconscionable under Pennsylvania or New York law); U1it4Less, Inc. v. FedEx Corp., 2015 WL 3916247, at *4 (S.D.N.Y. June 25, 2015) (standalone class-action waiver not unconscionable under New York law).
41 Palmer, 2012 WL 425256 at *3.
42 See Gilles, Opting Out of Liability: The Forthcoming, Near-Total Demise of the Modern Class Action, 104 Mich. L. Rev. 373 (2005). In Florida courts, two similar and overlapping inquiries emerge regarding whether class-wide proceedings are a substantive, nonwaivable right. Some plaintiffs frame the question as one of public policy and claim that an agreement is unenforceable for public policy reasons because it “defeats the remedial purpose of a statute.” E.g., Cruz v. Cingular Wireless, LLC, 2008 WL 4279690, at *2 (M.D. Fla. Sept. 15, 2008), aff’d, 648 F.3d 1205 (11th Cir. 2011) (construing Florida law); Fonte v. AT&T Wireless Services, Inc., 903 So. 2d 1019, 1024 (Fla. 4th DCA 2005). In evaluating whether a statute’s remedial purpose is defeated, courts examine whether the statute at issue was meant to confer a nonwaivable, substantive right. E.g., Fonte, 903 So. 2d at 1024-25. Other plaintiffs (those attempting to avoid arbitration agreements containing class-action waivers) frame the question as a conflict between the FAA and the statute at issue and claim that a particular statute contains a “contrary congressional command” precluding a waiver of class-wide proceedings. E.g., Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1330-32 (11th Cir. 2014). This inquiry, too, requires a court to determine whether the statute at issue confers a substantive, nonwaivable right. See id. at 1334. Because both frameworks share an evaluation of whether the right to class-wide procedure is a substantive, nonwaivable one, this is what this article will focus on rather than any differentiation between the two frameworks.
43 As the Second Circuit noted, the progression of Supreme Court decisions on the issue of class-action waivers in arbitration agreements “inexorably lead[s] to the conclusion” that class-wide procedure is not a substantive, nonwaivable right. Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 (2d Cir. 2013) (discussing waivers of collective action in FLSA context).
44 See, e.g., Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1628 (2018) (class- and collective-action waivable under NLRA); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 29 (1991) (collective action waivable under ADEA); Walthour, 745 F.3d at 1336 (11th Cir. 2014) (collective-action waivable under FLSA and pointing out that all circuits to address the issue by 2014 had come to the same conclusion); Fonte v. AT&T Wireless Services, Inc., 903 So. 2d 1019, 1024 (Fla. 4th DCA 2005) (class-action waivable under Florida Deceptive and Unfair Trade Practices Act).
45 Id.
46 Id.
47 Id. (citing to Walthour, 745 F.3d at 1336, which in turn collects cases from the Supreme Court and the Second, Fifth, and Eighth circuits rendering similar decisions regarding the FLSA, the ADEA, and the NLRA). Notably, the Supreme Court’s Epic Systems opinion conclusively decided that the NLRA does not confer a nonwaivable right to class or collective procedure. Epic Sys. Corp., 138 S. Ct. 1628 (“This Court has never read a right to class actions into the NLRA — and for three quarters of a century neither did the National Labor Relations Board.”).
48 Palmer, 2012 WL 425256 at *2.
49 E.g., Convergys Corp. v. NLRB, 866 F.3d 635, 639 (5th Cir. 2017) (finding that §7 of the NLRA did not confer nonwaivable, substantive right and rejecting the notion that “the FAA empowers arbitration agreements to waive rights that other agreements cannot waive”); LogistiCare Sols., Inc. v. Nat’l Labor Relations Bd., 866 F.3d 715, 717 (5th Cir. 2017) (following Convergys and holding that standalone class-action waiver did not violate NLRA); U1it4Less, Inc., 2015 WL 3916247 at *9 (nothing in RICO statutory scheme prevented enforcement of standalone class-action waiver); Kubischta v. Schlumberger Tech Corp, 2016 WL 3752917, at *7 (W.D. Pa. July 14, 2016) (following Korea Week’s decision regarding the unconscionability of standalone class-action waivers and adding that nothing in the Pennsylvania Minimum Wage Act, Ohio Prompt Pay Act, or Ohio Wage Act prohibited the standalone waiver of class-wide procedures); Benedict v. Hewlett-Packard Co., 2016 WL 1213985, at **2-5 (N.D. Cal. Mar. 29, 2016), appeal dismissed sub nom., Vieira v. Hewlett-Packard Co., 2017 WL 8683718 (9th Cir. Oct. 13, 2017) (collecting numerous cases from many different jurisdictions holding that there is no substantive, nonwaivable right to collective action under the FLSA and holding that standalone collective-action waiver was enforceable); see Palacios v. Boehringer Ingelheim Pharm., Inc., 2011 WL 6794438, at *4 (S.D. Fla. Apr. 19, 2011) (in dicta, noting that collective action not essential to vindication of substantive right and collective-action waiver was not unconscionable and did not violate NLRA). But see Meyer v. Kalanick, 185 F. Supp. 3d 448, 455 (S.D.N.Y. 2016) (applying California law to the concept of a standalone class-action waiver and holding that California would find such a waiver unenforceable on state law grounds).
JACQUELINE PRATS joined Trenam Law in 2015. She practices employment law and general business litigation and has represented companies in wage-and-hour, trade-secret, discrimination, and defamation matters. Prats graduated summa cum laude from Stetson College of Law, where she served as executive editor of Stetson Law Review.
This column is submitted on behalf of the Labor and Employment Law Section, Cathleen A. Scott, chair, and Robert Eschenfelder, editor.
