Arbitration Agreements v. Wage and Hour Class Actions

Transcription

1 Arbitration Agreements v. Wage and Hour Class Actions Brought to you by Winston & Strawn s Labor and Employment Practice Group 2013 Winston & Strawn LLP

2 Today s elunch Presenters Monique Ngo-Bonnici Labor and Employment Los Angeles mbonnici@winston.com Emilie Woodhead Labor and Employment Los Angeles ewoodhead@winston.com 2013 Winston & Strawn LLP 2

3 Topics to be Covered AT&T Mobility v. Concepcion Pros and cons of arbitration agreements post- Concepcion Limitations on pre-dispute arbitration agreements Unresolved issues as to enforceability, and challenges to enforceability Drafting issues in 2013 and beyond Issues to consider when class litigation is pending 2013 Winston & Strawn LLP 3

4 2013 Winston & Strawn LLP AT&T Mobility v. Concepcion

5 AT&T Mobility LLC v. Concepcion, 131 S. Ct (2011) Background Customers brought putative consumer class action against AT&T At issue was arbitration provision in AT&T service contract, requiring CA residents to: Arbitrate any disputes with AT&T, and Prohibiting them from adjudicating their disputes as part of a class action AT&T moved to compel arbitration 2013 Winston & Strawn LLP 5

6 Concepcion continued... District Court and 9th Circuit Plaintiffs challenged the arbitration agreement because of the class action waiver The trial and appellate courts sided with Plaintiffs and struck down arbitration agreement based on Discover Bank v. Superior Court Discover Bank held class action waivers are unenforceable as unconscionable under California law Court considered fact that lawyers and consumers not likely to pursue individual claims where the potential damages are very small In those situations, the reasoning goes, absent class actions, businesses could cheat consumers unchecked 2013 Winston & Strawn LLP 6

7 Concepcion continued... The Supreme Court Decision In a 5-4 decision, Court declared there is a policy more important than California s public policy announced in Discover Bank: the liberal federal policy embodied in the Federal Arbitration Act ( FAA ) that favors arbitration Thus, even though arbitration agreements are a matter of contract, where a state policy is inconsistent with the purposes and policies of the FAA, state policy is preempted by the FAA 2013 Winston & Strawn LLP 7

8 Concepcion continued... The Supreme Court Decision Court left open the possibility that states may apply state contract law to arbitration agreements with class action waivers to ensure the agreements are not otherwise unconscionable Court mentioned several pro-consumer protections in agreement in finding that consumers would be better off with individual arbitration than a class action: AT&T must pay all costs for non-frivolous claims For claims of $10,000 or less, customer may choose whether arbitration proceeds in person, by telephone, or based only on submissions Either party may bring claim in small claims court in lieu of arbitration Arbitrator may award any form of individual relief, including injunctions and presumably punitive damages AT&T has no ability to seek reimbursement of its attorneys fees If customer receives arbitration award greater than AT&T s last written settlement offer, AT&T must pay a $7,500 minimum recovery and 2x amount of claimant s attorneys fees 2013 Winston & Strawn LLP 8

9 What does Concepcion mean for employers? 2013 Winston & Strawn LLP

10 What does Concepcion mean for employers? The Good News: Concepcion provides employers a potentially valuable tool to limit class, collective, or representative action exposure Question: Given the continuing evolution of the case law post-concepcion, should your organization adopt an arbitration agreement or policy? 2013 Winston & Strawn LLP 10

11 Pros and Cons of Pre-Dispute Arbitration Agreements 2013 Winston & Strawn LLP

12 Pros: Minimize class action risk and exposure Faster resolution of disputes (potentially) Role in selection of arbitrator Possible cost savings An experienced decision-maker, rather than a jury Confidentiality Positive labor-management tool 2013 Winston & Strawn LLP 12

13 Cons: Extremely limited appeal rights Much more difficult to have case dismissed before trial on the merits Forum and other costs can be greater than civil action Cost of enforcement Unresolved issues as to required carve-outs and enforceability of class action waivers 2013 Winston & Strawn LLP 13

14 2013 Winston & Strawn LLP Limitations on Concepcion

15 Disputes Not Covered by Limitations on Pre-dispute Arbitration Agreements EEOC charges Unfair labor practice charges Other administrative claims (OFCCP, DOL audits) SOX whistleblower complaints Unemployment and workers compensation For Department of Defense contractors, Title VII claims and related torts (Franken Amendment) 2013 Winston & Strawn LLP 15

16 Limitations on Concepcion: Does the Need for Effective Vindication Invalidate Arbitration Agreements with Class Action Waivers? 2013 Winston & Strawn LLP

17 Effective Vindication Effective vindication: Parties should not be prevented from exercising their right to pursue statutory claims American Express v. Italian Colors Rest. (S. Ct. June 2013) The parties had an arbitration agreement with class action waiver Plaintiff sought to circumvent it on the grounds that the cost of expert analysis necessary to prove the claims would far exceed individual damages recovery, so the statutory rights at issue could only be vindicated by a class action Supreme Court rejected this argument and upheld the agreement Parties are not guaranteed an affordable procedural path to the vindication of every claim BUT there might be a problem if the agreement forbade the assertion of certain statutory rights or required filing fees that made access to the forum impractical Effect on wage and hour class actions 2013 Winston & Strawn LLP 17

18 Limitations on Concepcion: California Courts Are Split Over Waiver of Private Attorney General Act ( PAGA ) Claims 2013 Winston & Strawn LLP

19 Private Attorney General Act of 2004 PAGA allows a private citizen to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency ( LWDA ) for Labor Code violations suffered by the citizen and other current or former employees Any civil penalties recovered are split between the LWDA (75%) and the aggrieved employee(s) (25%) Codified at California Labor Code 2698 et seq Winston & Strawn LLP 19

20 Can PAGA Representative Actions Be Waived? Quevedo v. Macy s Inc. (C.D. Cal. June 2011) Brown v. Ralphs Grocery Co. (Cal. Ct. App. July 2011) Quevedo Revisited (C.D. Cal. Sept. 2011) On September 19, 2012, the California Supreme Court accepted review of Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal. App. 4th 949 (2d. Dist. App. 2012). This case presents an opportunity for the Court to review Concepcion s scope concerning class action waivers generally and PAGA claims specifically. Kilgore v. Keybank (9th Cir. Apr. 2013) Brown v. Morgan Tire & Auto (Cal. Ct. App. June 2013) 2013 Winston & Strawn LLP 20

21 Limitations on Concepcion: Class Action Waivers and the Right of Employees to Engage in Protected Activity D.R. Horton, Inc Winston & Strawn LLP

22 In re D.R. Horton, Inc. D.R. Horton required that new and current employees sign an arbitration agreement as a condition of employment The agreement prohibited the arbitrator from: consolidating claims as a class or collective action, and awarding relief to a class of employees in an individual proceeding Issue: Whether D.R. Horton s class arbitration waiver violated the National Labor Relations Act ( NLRA ) 2013 Winston & Strawn LLP 22

23 D.R. Horton, Inc. Continued... NLRB Holding: the class arbitration waiver violated the NLRA The NLRB ruled that requiring employees to waive their right to bring class claims as a condition of employment violates the NLRA According to the NLRB, filing a class or collective action is a protected substantive right under Section 7 of the NLRA The NLRB declared that its ruling was not in conflict with Concepcion 2013 Winston & Strawn LLP 23

24 Federal Courts Address D.R. Horton And Class Action Waivers Enforceable LaVoice v. UBS Financial Services, Inc. (S.D.N.Y. Jan. 13, 2012) To the extent that LaVoice relies... [on] the recent decision of the National Labor Relations Board ( NLRB ) in D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764, January 3, 2012, as authority to support a conflicting reading of AT&T Mobility, this Court declines to follow [this] decision[]. Morvant v. P.F. Chang s China Bistro, Inc. (N.D. Cal. May 07, 2012) While the NLRB s analysis in D.R. Horton makes a somewhat compelling argument that agreements that require employees to submit to individual arbitration should not be enforced as against public policy, that reasoning does not overcome the direct, controlling authority holding that arbitration agreements, including class action waivers contained therein, must be enforced according to their terms. Owen v. Bristol Care, Inc. (8th Cir. Jan. 7, 2013) D.R. Horton carries little persuasive authority because the court is not obligated to defer to [the NLRB s] interpretation of Supreme Court precedent... Chen-Oster, et al. v. Goldman Sachs & Co., et al. (2d Cir. Mar. 21, 2013) Court noted that there is no right to bring a substantive pattern-or-practice claim, courts have consistently ruled that Title VII claims can be subject to mandatory arbitration, that Congress specifically approved arbitration of these claims in the Civil Rights Act of 1991, and that the Supreme Court has consistently interpreted the FAA as establishing a federal policy in favor of arbitration agreements. Dixon v. NBC Universal Media, LLC (S.D.N.Y. May 28, 2013) Citing Concepcion, the court join[ed] the vast majority of courts in holding that the right to proceed collectively under the FLSA can be waived in an arbitration agreement. Richards v. Ernst & Young (9th Cir. Aug. 21, 2013) Unanimous decision enforcing the class action waiver at issue Winston & Strawn LLP 24

25 Federal Courts Address D.R. Horton And Class Action Waivers Unenforceable Sutherland v. Ernst & Young (S.D.N.Y. Jan 17, 2012) Unenforceable, despite Concepcion, because Plaintiff is not able to vindicate her rights [under the FLSA] absent a collective action. Raniere v. Citigroup Inc. (S.D.N.Y. 2011) Invalid because it would not allow Plaintiffs to vindicate their statutory rights and prevent the FLSA from serving its remedial and deterrent functions. Takeaway: Overarching concern is about the fairness of upholding a waiver that essentially precludes a party from vindicating its statutory rights. To help cause, employers should at least ensure that that employment arbitration agreements are procedurally and substantively fair to their employees Winston & Strawn LLP 25

26 2013 Winston & Strawn LLP Limitations on Concepcion: Basic Fairness and Unconscionability

27 Unconscionability Many jurisdictions are taking a middle ground: On the one hand: Most decisions reject arguments that companies are precluded by law from requiring individual arbitration of employment disputes On the other: Concepcion does NOT mean that arbitration agreements are automatically enforceable Unconscionability: Determining enforceability based on how a particular agreement is designed In California: Agreement must comply with Armendariz v. Foundation Psychcare Services, Inc., 24 Cal. 4th 83 (2000) 2013 Winston & Strawn LLP 27

28 2013 Winston & Strawn LLP Drafting Issues

29 Drafting Issues Avoiding Unconscionability Must not be both substantively and procedurally unconscionable Adequate consideration Agreement to arbitrate must be mutual and not one-sided Must expressly provide for: Neutral arbitrator Adequate discovery Same rights and remedies available as in court Employer pays costs unique to arbitration Written award and decision 2013 Winston & Strawn LLP 29

30 Drafting Issues Determining the Scope What disputes covered? What rules apply? Where will hearing be conducted? What law applies? May an employee opt out? Who determines enforceability: arbitrator or court? Is mediation required before arbitration? No modification to at-will employment relationship How will agreement be amended? 2013 Winston & Strawn LLP 30

31 Unique Issues re the Class Action Waiver As broadly drafted as possible: class, collective, or representative actions Oxford Health Plans v. Sutter (S. Ct. June 2013) Arbitration agreement silent as to arbitration of class claims Arbitrator interpreted agreement as permitting class arbitration Issue was properly before arbitrator, and interpretation was not subject to Court s review Non-severability of clause No authority of arbitrator to hear claims on a class, collective or representative basis Consider snap-back clause 2013 Winston & Strawn LLP 31

32 Issues to Consider When Class Litigation Is Pending 2013 Winston & Strawn LLP

33 Clear and Conspicuous Notice of the Pending Action Courts have emphasized that one key to a valid class action waiver involving putative class members is clear and fair notice of the pending action and the effect of the waiver on the putative class members rights in the pending action. In re Currency Conversion Fee Antitrust Litig., 361 F. Supp. 2d 237 (S.D.N.Y. 2005) [i]n the absence of candid disclosure, it would be unconscionable to allow [defendants] to nullify [plaintiffs ] rights. Long v. Fidelity Water Systems, Inc., 2000 U.S. Dist. LEXIS 7827, at *10 (N.D. Cal. 2000) denied motion to compel arbitration because agreement lacked express language indicating its retroactive application, and found that plaintiff s status as a putative class member at the time defendants communicated with him weakens any argument that he knowingly and voluntarily entered into an arbitration agreement Winston & Strawn LLP 33

34 Clear and Conspicuous Notice of the Pending Action Securitas Cases In light of Concepcion, Securitas Security Services implemented a nationwide Dispute Resolution Program that required individualized arbitration Actions were pending against Securitas in several states at the time Agreement listed five pending representative actions covered by the agreement. Named plaintiffs and those who joined actions as party plaintiffs prior to receiving the arbitration agreement were not bound by the agreement with respect to those actions Plaintiffs involved in putative class actions in Iowa and Pennsylvania filed motions for protective orders alleging the arbitration agreement amounted to improper communications with putative class members The Southern District of Iowa and Eastern District of Pennsylvania issued decisions favorable to plaintiffs 2013 Winston & Strawn LLP 34

35 2013 Winston & Strawn LLP Questions?

36 2013 Winston & Strawn LLP Thank You.

37 Contact Information Monique Ngo-Bonnici Labor and Employment Los Angeles (213) Emilie Woodhead Labor and Employment Los Angeles (213) Winston & Strawn LLP 37