1. 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

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

3. 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

4. Settlement Costs are High

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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. Implementation Considerations

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

14. 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.”

15. 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”).”

16. 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.”

17. 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

18. 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.

19. 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.”

20. 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

21. 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?

22. 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

23. 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?

24. 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

25. Questions?

26. Bring Your “A” Game: Arbitration Agreements with Class Waivers
Douglas Smith, Esq.
(206)
Breanne Martell, Esq.
(206)
Littler Mendelson, P.C. Seattle Office
Rachelle Wills, Esq.
Providence St. Joseph Health
(425)