Class Action Waivers: To Waive or Not to Waive?

Class action waivers are becoming increasingly prevalent in employment contracts due to their ability to make it more difficult for employees to assert class action lawsuits against their employers. However, the question is – can employers reasonably expect a court to uphold such an agreement and require an employee to pursue his or her grievance on an individual basis as opposed to a class basis? Two recent decisions from the United States District Court for the District of Massachusetts demonstrate the unpredictable nature of how a court may rule when faced with class waivers.

In Tigges v. AM Pizza, Inc., the court refused to enforce a class action waiver in a mandatory arbitration agreement between a Domino’s franchisee and its delivery driver employee who was asserting wage and tip law violations. In a second case, Bekele v. Lyft, Inc., the court ruled that Lyft’s class action waiver provision was enforceable. To determine whether the class action waiver provision was enforceable both courts endeavored to answer the same question: whether an employee’s ability to bring a class action lawsuit is a substantive, non-waivable right protected by Section 7 of the National Labor Relations Act (“NLRA”), thus rendering the class action waiver provision unenforceable.

In addition to the federal court in Massachusetts, this issue has been analyzed by many courts across the country. To date, most courts have rejected the argument that class-action waivers violate the NLRA. Specifically, Section 7 of the NLRA provides:

“Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”

The fundamentally different interpretation of the phrase ‘to engage in other concerted activities’ is the focal point of the analysis. In Tigges, the class-action waiver provision was the “Achilles’ heel” of the arbitration agreement and the court held that it would infringe on a substantive federal right to engage in ‘concerted activity’ as protected by Section 7. In Bekele, the Court stated that ‘other concerted activities’ must be interpreted to mean other activities of a similar type as the three enumerated activities: the right to self-organization, the right to form, join, or assist labor organizations and the right to bargain collectively. As a result, the court held that the NLRA does not include the employee’s ability to bring a class-action lawsuit because it is of a different class or character than the enumerated rights.

Debate over the enforceability of class-action waivers in the employment context is far from settled law, especially after these two recent decisions. For plaintiffs’ counsel, there is hope that the national debate will eventually come out in the employees’ favor and class action waivers will not be used to bar employees from exercising their rights to file a class action lawsuit. Defense counsel continues to advocate for the enforceability of class action waiver provisions because they can substantially limit employers’ potential exposure. If you are interested in discussing the possibility of including a class action waiver in your employment agreements, contact a Rudolph Friedmann attorney who can discuss this matter in greater detail with you.