On August 22, 2016, a divided panel of Ninth Circuit Court of Appeals issued an opinion in Morris v. Ernst & Young holding that class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act (NLRA) and are unenforceable. Section 7 of the NLRA provides that employees have the right “to engage in . . . concerted activities for . . . mutual aid or protection.”

While the panel agreed with the Seventh Circuit and the National Labor Relations Board on this issue, the decision directly conflicts with the Fifth Circuit’s decision in D.R. Horton, Inc. v. NLRB, as well as cases deciding the same issue in the Second, Eighth, and Eleventh Circuits. It is possible the full Ninth Circuit will reconsider Morris, and it is likely that the United States Supreme Court will eventually resolve the split between the Circuits.   

This case presents interesting issues for California employers. California state courts are not bound by the Ninth Circuit’s decision in Morris. California courts are bound by the California Supreme Court’s decision in Iskanian v. CLS Transportation, which expressly upheld the validity of class action waivers in arbitration agreements, with the exception of representative claims filed under California’s Private Attorneys General Act of 2004 (PAGA). So arbitration agreements that are valid in state court would be unenforceable if the same employee sues in federal court. The Morris decision also suggests that the arbitration agreement at issue may have been upheld if it gave employees the opportunity to opt-out of the agreement.

It is recommend that employers consult with employment counsel to determine if their arbitration agreements need to be revised.

For more information, contact Jason Resnick at (949) 885-2253