The Ninth Circuit, in a strongly-worded 2-1 decision, held that an employer may not require an employee to sign a contract giving up the right to pursue work-related legal claims together with his or her co-workers. Morris v. Ernst & Young, 2016 WL 4433080 (9th Cir. Aug. 22, 2016). In this case, Ernst & Young required employees to agree 1) to pursue legal claims exclusively through arbitration and 2) to arbitrate only as individuals and in “separate proceedings.” The Ninth Circuit held the “separate proceedings” terms in the contract, banning concerted legal claims, cannot be enforced.
The National Labor Relations Board (NLRB) has repeatedly held that arbitration agreements waiving employees’ rights to pursue joint, class or collective action in employment disputes violate Section 8(a)(1) of the National Labor Relations Act (NLRA), because requiring employees to agree to resolve all employment-related claims through individual arbitration violates employees’ rights under Section 7 of NLRA the to engage in protected concerted activities. D.R. Horton, Inc., 357 N.L.R.B. No. 184 (2012), enf. denied 737 F.3d 344 (5th Cir. 2013); Murphy Oil, 361 NLRB No. 72 (2014), enf. denied, 808 F.3d 1013 (5th Cir. 2015); 24 Hour Fitness USA, Inc., 363 NLRB No. 84 (2015).
Morris was not a Board case, but rather a misclassification and unpaid overtime case under the Fair Labor Standards Act and California wage law. Nevertheless, calling the rights guaranteed by Section 7 of the NLRA the “central, fundamental protections of the Act,” the Court adopted the position of the NLRB. “Concerted action is the basic tenet of federal labor policy,” wrote the court. Requiring employees to pursue work-related claims individually is the “very antithesis” of Section 7’s substantive right to pursue concerted work-related legal claims.
This case adds to the circuit split over the legality of class action waivers and all but guarantees that the U.S. Supreme Court will have the final word. The case is a forceful re-affirmation of employees’ fundamental right, guaranteed by the NLRA, to engage in “concerted activities,” including to join together to improve their wages and working conditions. It is also a blow to employers who seek to deny workers of that right by requiring them, as a condition of employment, to waive their right to pursue class or collective actions enforcing their rights to be paid the minimum wage or overtime, to be free from discrimination, or to many other work-related benefits and protections.