Ironically, giving employees the right to decline to resolve their employment claims in binding arbitration may actually help employers enforce arbitration agreements in some parts of the country.
Agreements compelling employees to arbitrate their employment claims on an individual basis – and waive class action claims (and similar collective action claims like those brought under the federal wage and hour laws) – were generally upheld until recent challenges under the National Labor Relations Act. Now, there is a split among the federal appellate courts. In particular, the Seventh and Ninth Circuit Courts of Appeal have said employers cannot require employees to waive their right to bring class and collective actions because the NLRA provides employees with a substantive right to bring class and collective actions and does not conflict with the Federal Arbitration Act. Several other federal appellate circuits (the Second, Fifth and Eighth Circuits) have rejected that position and maintained arbitration agreements with class and collective action waivers are enforceable.
A recent appellate case out of the Ninth Circuit may pave the way for employers trying to navigate this tricky terrain. In that case, the Court rejected a challenge by Uber drivers to an arbitration provision which waived their right to bring class or collective claims, but permitted them to opt out of arbitration. The Court said any challenge under the NLRA would fail because “the option to opt-out meant that Uber drivers were not required ‘to accept a class-action waiver as a condition of employment,’ and thus there was ‘no basis for concluding that [Uber] coerced [Plaintiffs] into waiving [their] right to file a class action’ in violation of the NLRA.”
In light of this case, employers in the Seventh and Ninth Circuits should consider revising arbitration agreements with class and collective waivers to include opt-out clauses. Notably, however, opt-out clauses should typically: (a) clearly inform employees of their right to opt out of arbitration; and (b) require employees to affirmatively notify their employer, in writing, of their desire to opt out of arbitration within a specified time period after executing an employment agreement. Of course, before adopting opt-out provisions in their arbitration agreements, employers should carefully weigh the risk that employees will, in fact, choose to opt out of arbitration against the possibility that arbitration clauses with class and collective waivers might be rendered entirely unenforceable.