In the case, Morris v. Ernst & Young, LLP, Ernst & Young required employees to sign employment contracts containing a “concert action waiver” which forced workers to arbitrate their claims against the company individually. The United States District Court for the Northern District of California previously ordered the claims to be arbitrated individually pursuant to their agreement. Shortly after, the plaintiffs’ filed an appeal with the U.S. Court of Appeals for the Ninth Circuit claiming their right to engage in “concerted activities for the purpose of collective bargaining and other mutual aid or protection” had been violated.
On August 22, 2016, the Ninth Circuit held that the clause was unenforceable due to employee rights. The Court’s verdict came from the National Labor Relations Act (“NLRA”), in which Section 7 states that employees have “the right to engage in concerted activity to address workplace grievances, through litigation or otherwise.” The Court based its decision on the fact that the NLRA was enacted to grant employees the right to seek improvement of their working conditions, which includes a “lawsuit filed in good faith by a group of employees.” The Court also stated that the ban on “concerted legal action” itself was a second violation, also an unfair legal practice under the NLRA. The Ninth Circuit also remained consistent with the Seventh Circuit’s decision in Lewis v. Epic Systems Corp. stating that “[a] contract that limits Section 7 rights that is agreed to as a condition of continued employment qualifies as ‘interfer[ing] with’ or ‘restrain[ing]…employees in the exercise’ of those rights in violation of Section 8(a)(1)” (823 F.3d 1147, 1155 (7th Cir. 2016).
Even with this ruling, the enforceability of such class action waivers remains unclear. Along with this decision, may be an emerging split amongst Circuit Courts. Some, including the Second, Fifth, Eighth, and Eleventh Circuits, have rejected the reasoning from the Morris decision claiming that “arbitration agreements containing class waivers are enforceable.” Due to the disagreements regarding the enforceability of class waivers, the end-result will have to be resolved by the Supreme Court. But stay tuned as this could get even more interesting, depending on who fills Justice Scalia’s vacancy on the Court.