Court of Appeals Makes a Great Decision for California Employees

by Norman B. Blumenthal on September 23, 2016

blumenthal nordrehaug & bhowmik, southern california employment law, southern california employment law attorneys, court of appeals, california employeesIn recent news, California employees will be glad to hear that the Court of Appeals vacated the district court’s order compelling individual arbitration of employees’ class action against Ernst & Young. Allegations of misclassification and failure to pay overtime wages led the charge in the employees’ fight to right the wrongs done in violation of the Fair Labor Standards Act as well as California state labor laws.

According to allegations made in the suit, employees were required to sign agreements as a condition of employment. Included in the employment agreement was a “concerted action waiver” that required any and all employees pursuing legal claims against the company through arbitration only arbitrate claims as individuals – in “separate proceedings.” The Appeals Court panel held that requiring an employee to sign this type of employment contingent agreement violated sections 7 and 8 of the National Labor Relations Act. An employer is not to prevent their employees from bringing concerted legal claims regarding employment law violations (i.e. wage claims, wage and hour allegations, terms of condition of employment issues, etc.) to light in any forum.

The Court of Appeals found that Ernst & Young’s employment agreement requiring that all employees resolve legal claims in “separate proceedings” interfered with the employees’ right to engage in concerted action as addressed in the National Labor Relations Act. The panel found that the “separate proceedings” portion of the Ernst & Young contract is not enforceable and that the Federal Arbitration Act did not contradict their conclusions.

According to the panel, an arbitration contract that professes to waive a substantive federal right will bring the savings clause of the Federal Arbitration Act into play – preventing the enforcement of the waiver. As a result of the Court of Appeals review, the district court order was vacated. The Court of Appeals remanded to the district court for a determination on whether the “separate proceedings” clause in the Ernst & Young employment contract was severable from the contract as a whole.

If you have questions or concerns regarding arbitration waivers in employment contracts or the enforcement of arbitration agreements, please get in touch with one of the southern California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.

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