Is Relief on the Horizon for California Employers Attempting to Enforce Arbitration Agreements as Class Waivers?

By: Heather M. Sager

In California, a hotbed of wage and hour class and collective action filings, a recent appellate court opinion provides some long-awaited good news for employers attempting to enforce arbitration agreements as class waivers. In Reyes v. Liberman Broadcasting, Inc., plaintiff  Jesus Reyes worked for Liberman Broadcasting, Inc. from April to September 2009.  Pre-hire, Reyes executed an arbitration agreement.  In May 2010, he filed a class action alleging wage and hour violations on behalf of a putative class of security officers.  When it initially answered the Complaint, Liberman failed to raise the issue of arbitration.  In July 2011, Liberman filed a motion to compel Reyes to arbitrate his wage and hour claims as an individual (versus holding a role as a class representative).  The court denied the motion, finding that Liberman had waived its rights via the delay.  This led Liberman to appeal, resulting in a decision further interpreting the U.S. Supreme Court’s April 2011 decision in AT&T Mobility v. Concepcion, which held that the Federal Arbitration Act preempts state laws that invalidate class action arbitration waivers.  To date, courts have to date [delete] been split on whether Concepcion overruled the California case of Gentry v. Superior Court, which required class arbitration under certain circumstances. However, last Friday, the appellate court, in Reyes, reversed the lower court’s denial of Liberman’s motion to compel arbitrationIn so ruling, the Second District Court of Appeal held, “an arbitration agreement silent on the issue of class arbitration may have the same effect as an express class waiver.”  (The Second District Court of Appeal declined to decide whether the Gentry case remains good law following the Concepcion ruling, holding instead that Reyes failed to show that the Gentry factors made the arbitration agreement unenforceable.)

The Court of Appeal also held that although Liberman did not mention the arbitration agreement in its answer and had previously engaged in discovery in the case, the company did not waive its right to compel arbitration. In so holding, the appellate court found that Liberman reasonably concluded it could not enforce the arbitration agreement before the Concepcion decision, given the fact that several California decisions pre-Concepcion appeared to require class arbitration in similar contexts.  The Court of Appeal opined, the “risk [of compelled class arbitration] diminished substantially when Concepcion changed the legal landscape, and Liberman promptly informed Reyes of its intent to arbitrate one month after the [Concepcion] decision and filed its motion to compel a month later.”  Accordingly, the opinion stated, “Liberman did not act inconsistently with a right to arbitrate by not moving to compel until after Concepcion.”

The body of law on enforcing arbitration agreements as class waivers is still developing post-Concepcion, but perhaps Reyes v. Liberman Broadcasting, Inc. indicates that there is some relief on the horizon.

William Horwitz Authors Articles for New Jersey Law Journal and BNA’s Corporate Counsel Weekly

William Horwtiz, counsel in the Labor & Employment practice group, recently authored articles for both the New Jersey Law Journal and BNA’s Corporate Counsel Weekly.

William’s article for the New Jersey Law Journal titled, “Third Circuit Rides the Class-Action Arbitration Waive”, discusses the case of Quilloin v. Tenet HealthSystem Philadelphia, in which the Third Circuit, following the U.S. Supreme Court’s lead and its own precedent, endorsed the validity of class-action waivers in predispute employment arbitration agreements.  Bill outlines the facts of the case and the court’s reasoning and says that the case offers helpful guidance for employers rolling out new arbitration agreements and employers with existing agreements.  He also notes that Quilloin holds that class-action waivers are en­forceable and employers should consider including them in arbitration agree­ments, adding that employers should also “include a provision requiring the parties to submit arbitrability issues to the arbitrator.”

William’s article for BNA’s Corporate Counsel Weekly, “In Case Involving Employer’s Poor Handling of Sexual Harassment Allegation, Second Circuit Resolves Two Novel Issues”, William discusses the case of Townsend v. Benjamin Enterprises, Inc., in which the U.S. Court of Appeals for the Second Circuit resolved two issues of first impression.  In outlining the facts of the case and the court’s observations, William notes that the most important takeaway from the decision may be the important guidance for employers of how not to address sexual harassment in the workplace.

To read the complete article, “Third Circuit Rides the Class-Action Arbitration Waive”, click here.

To read the complete article,  “In Case Involving Employer’s Poor Handling of Sexual Harassment Allegation, Second Circuit Resolves Two Novel Issues”, click here.

$100 Million Pattern-or-Practice Gender Discrimination Suit Doomed By Company’s Arbitration Agreement

A federal district court in Massachusetts effectively gutted a prominent plaintiff’s class action firm’s attempt to avoid arbitration agreements and litigate on a class-wide basis in federal court in Boston. This ruling comes on the heels of a series of class and collective actions filed in federal courts against major U.S.-based and international employers by the Sanford Wittels & Heisler law firm.

In Karp v. CIGNA Healthcare, Inc., the plaintiff-employee was a senior contract manager at CIGNA who asserted discrimination claims in a proposed $100 million putative class action alleging systemic gender discrimination in violation of Title VII of the Civil Rights Act of 1964. Karp’s efforts to represent a class of potentially thousands of current and former female employees were halted when, the district court effectively foreclosed her from proceeding on a class-wide basis either in federal court or in arbitration.

To read the full alert authored by John Ridley and Larry Del Rossi click here.

Meal and Rest Breaks: The Brinker Wait is Over

Ever since the California Supreme Court granted review in Brinker Restaurant Corp. v. Superior Court of San Diego County (Hohnbaum) in October 2008, California employers have anxiously awaited the California Supreme Court’s standards for meal and rest breaks provided to non-exempt employees.   To read our full alert authored by Pascal Benyamini and Fey Epling click here.