A Gorsuch Confirmation Could Save Class Action Waivers for Employers

February 10, 2017

We have previously written on the advisability of employers entering into arbitration agreements with their employees that include a waiver of the employee’s right to initiate or join class action litigation against the employer. Such agreements help guard against the possibility of potentially company-wide litigation over employment issues ranging from alleged wage and hour violations to age discrimination. Without such protections, employers can face significant liability for even relatively minor legal infractions.

Over the past several years, federal courts and the NLRB have been playing a tennis match over the enforceability of these waivers. Without fail, the NLRB finds these waivers to be unenforceable. The Courts, on the other hand, typically reject the NLRB’s decisions and rule in favor of the employer, relying upon a preference in federal law for the resolution of disputes through arbitration. This changed, however, in 2016, when both the 7th and 9th Circuits upheld NLRB decisions ruling that class or collective action waivers were unenforceable by employers. Thus, in the last year, the tide seemed to have swung against employers’ attempts to protect themselves from ruinous litigation through class action waivers.

On January 13, 2017, the Supreme Court accepted for review these two cases, as well as a 5th Circuit decision upholding the validity of a class action waiver. Initially, it was expected that these consolidated matters would be heard by the Court this term, with a decision issued by the summer. In what many considered to be a surprise, however, this case will not be heard by the Court until October 2017 at the earliest, meaning a decision will not be issued until sometime in late 2017 or 2018. That means, barring something currently unforeseen in the confirmation process, Judge Gorsuch should be sitting on the bench at the time the case is heard.

That is likely good news for employers and the future of enforceability of class action waivers. While serving on the 10th Circuit Court of Appeals, Judge Gorsuch’s published opinions have strongly favored employers in disputes with their employees. While Judge Gorsuch has upheld the NLRB’s decisions in the three cases before him for which he wrote for the majority, two of those three opinions favored the employer. Judge Gorsuch also dissented in one NLRB case before him, in which he would have overturned the NLRB’s decision and would have found in favor of the employer. Similarly, out of the 14 published majority decisions Judge Gorsuch issued on employment discrimination cases, nine were favorable to the employer, only three were favorable to the employee, and two were partial reversals.

Finally, Judge Gorsuch has come out in recent years as a strong proponent of overturning the Supreme Court’s Chevron Doctrine. Under Chevron, courts give deference to an administrative agency’s interpretation of ambiguous statutes within their administrative jurisdiction. Judge Gorsuch’s hostility to Chevron indicates a strong disfavor toward administrative bodies acting as legislative bodies, and may telegraph his leanings on the NLRB’s actions in the absence of clear legislative guidance as to the enforceability of class action waivers, particularly where those waivers are contained in arbitration provisions, which federal laws strongly favor.

Although the enforceability of class action waivers will remain a contested legal issue for the next year, until the Supreme Court’s decision, there is a strong possibility that they will be found to be enforceable under federal law. Given that an enforceable class action waiver provides a strong shield against potentially ruinous litigation, employers should continue to require that employees sign arbitration agreements containing class action waivers pending the Supreme Court’s decision on this issue.