Bring Your “A” Game: Arbitration Agreements with Class Waivers January 25, 2018 Presented by: Douglas Smith & Breanne Martell Littler Mendelson, P.C. Rachelle Wills Providence St. Joseph Health

WHY CONSIDER IMPLEMENTING individual ARBITRATION AGREEMENTs WITH A CLASS ACTION WAIVER?

Wave of Wage and Hour Class Actions Continues Meal and rest breaks Minimum wage and overtime Off-the-clock work Misclassification Exempt employees Independent contractors

Settlement Costs are High

Risk of Class/Collective Action Certification is High Federal District Courts in 2017: Granted: 194 Denied: 72

U.S. Supreme Court Enforces Arbitration Agreements as Written AT&T Mobility v. Concepcion (U.S. 2011): Limiting the enforcement of class action waivers “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” and is preempted by the FAA CompuCredit Corp. v. Greenwood (U.S. 2012): Arbitration agreements must be enforced as written absent an act of Congress expressly stating otherwise American Express Co. v. Italian Colors (U.S. 2013): Cost of individual arbitration, even of a statutory claim, does not preclude enforcement of class action waivers DIRECTV v. Imburgia (U.S. 2015): Reversing state court’s refusal to enforce arbitration agreement with class action waiver

Enforceability of Class Action Waivers Since Concepcion, many federal courts have enforced class waivers However, some have not... 9th Circuit Johnmohammadi v. Bloomingdale’s, Inc. (2014): enforcing class waiver in voluntary arbitration agreement where plaintiff had the right to opt out Morris v. Ernst & Young, LLP (2016): refusing to enforce class waiver in mandatory arbitration agreement where plaintiff did not have right to opt out

What About the NLRB? D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012): Class actions are “concerted protected activity.” Mandatory arbitration agreements with class action waivers violate Section 7 of the NLRA Courts of Appeal are split: 2nd, 5th, and 8th Circuits: rejected D.R. Horton 6th, 7th, and 9th Circuits: agreed with D.R. Horton Supreme Court will decide the split in early 2018 Predicted to affirm enforceability of arbitration agreements with class action waivers, but will not know until decision is issued With change in membership (including a former Littler attorney), NLRB may overturn D.R. Horton

Advantages of Arbitration vs. Court Litigation Reduced costs v. litigation Privacy / confidentiality Substantial control over choice of arbitrators Lack of jury reduces settlement value Avoids “runaway” jury awards Process is often faster Class action waivers

Disadvantages of Arbitration Costs are increasing, especially because employers generally pay all costs Arbitrators may be less likely to grant summary judgment and other dispositive motions Reduced appellate rights Tendency to “split the baby” Less predictability Risk of multiple arbitrations

Impact on Employees Positives for Employees: Less formal and intimidating Faster with no lengthy appeals Easier to file a claim Same damages available Company may pay most costs

Implementation Considerations

Who Is Subject to the Agreement? New Employees? Pending Litigation? Existing Employees?

Which Claims Are Covered? “Any and all disputes arising under this Agreement, other than a claim for injunctive relief brought by the Company, shall be resolved by mandatory arbitration in accordance with the rules of the American Arbitration Association at the option of the party who initiates the arbitration.”

Class Action Waiver “Class and Collective Action Waiver. This Agreement affects your ability to participate in class and collective actions. Both the Company and you agree to bring any dispute in arbitration on an individual basis only, and not on a class or collective basis on behalf of others. There will be no right or authority for any dispute to be brought, heard or arbitrated as a class or collective action, or as a member in any such class or collective proceeding (“Class Action Waiver”).”

Voluntary or Mandatory? “Your Right to Opt Out of Arbitration - Arbitration is not a mandatory condition of your employment at the Company, and therefore you may notify the Company that you wish to opt out and not be subject to this Agreement. In order to be effective, your opt out notice must be provided to the Company's Human Resources Department [ADDRESS] within 30 days of your receipt of this Agreement.”

Are the Provisions Too One-Sided? Procedural Understandable language Transparent presentation Advised to consult with attorney Discovery Substantive Mutuality Time limits for claims Remedies available Cost

Washington State Case Arbitration. All disputes or claims between the parties related to this Agreement shall be submitted to binding arbitration in accordance with the rules of [the] American Arbitration Association within 30 days from the dispute date or claim. Any arbitration proceedings brought by Client shall take place in Orange County, California. Judgment upon the decision of the arbitrator may be entered into any court having jurisdiction thereof. The prevailing party in any action or proceeding related to this Agreement shall be entitled to recover reasonable legal fees and costs, including attorney’s fees which may be incurred.

Who Pays the Fees and Costs? “The costs of arbitration shall be borne equally by the parties.” “Each party shall pay for each party's attorneys' fees and costs, if any. However, the arbitrator may award the prevailing party to recover such fees and costs in accordance with applicable law.” “In no event will you be responsible for any portion of those fees in excess of the filing or initial appearance fees applicable to court actions in the jurisdiction where the arbitration will be conducted. The Company otherwise shall pay all costs and expenses unique to arbitration, including without limitation the arbitrator’s fees.”

Other Provisions to Include? Delegate authority to court to decide enforceability of class waiver Expressly allow the arbitrator to hear or grant dispositive motions Severability clause Internal dispute resolution process

Implementation Issues What about employees who won’t sign? Training? FAQs? In a handbook, or stand-alone agreement? Electronic signatures? How and when to roll out? Retention of arbitration agreements?

Our Recommendations Roll out individual arbitration agreement with class waiver for new and current employees Require exhaustion of internal dispute process Allow a 30-day opt-out period for employees Exclude certain claims, including claims for provisional injunctive relief Agree on designated arbitration service to conduct arbitrations

A Lawsuit Has Been Filed: Now What? Determine if an arbitration agreement exists with the plaintiff that covers the asserted claims Employment agreement? Confidentiality agreement? Arbitration agreement? Decide whether to arbitrate or litigate Move the court for relief before doing anything else to avoid waiver Motion to compel arbitration Stay or dismiss?

Recent Cases Success: Biviano v. Dick’s Sporting Goods (Spokane Super. Ct.) Upheld enforceability of arbitration agreement with a class action waiver based on opt-out provision Failure: Estate of Romney v. Franciscan Medical Group (Wash. Ct. Appeals) Held that employer waived right to compel individual arbitration Success: age discrimination class/collective action in federal court Compelled to arbitration individuals subject to agreement and stayed the entire case

Questions?

Bring Your “A” Game: Arbitration Agreements with Class Waivers Douglas Smith, Esq. (206) 381-4906 desmith@littler.com Breanne Martell, Esq. (206) 381-4920 bsmartell@littler.com Littler Mendelson, P.C. Seattle Office Rachelle Wills, Esq. Providence St. Joseph Health (425) 525-5221 rachelle.wills@providence.org