Seyfarth Synopsis: Workplace arbitration programs continued to have a profound impact on workplace class action litigation in 2021. Such programs influenced the nature of class action litigation filed and shifted the types of claims asserted as the plaintiffs’ bar continued to find ways to pivot around such obstacles.
As employers clawed for cover from the increasing weight of workplace class action litigation in recent years, workplace arbitration has continued to gain traction, aided by the U.S. Supreme Court’s transformative ruling in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). Epic Systems reaffirmed that the Federal Arbitration Act (FAA) requires courts to enforce agreements to arbitrate according to their terms, including mandatory agreements that provide for individual proceedings and include class action waivers.
Bolstered by such precedents, more than half of non-union, private-sector employers and more than two-thirds of large employers have adopted mandatory arbitration agreements. Such programs have continued to shift class action litigation dynamics in critical ways as they have led to more front-end attacks on proposed class and collective actions and, as the result of such attacks, to the defense bar dismantling more workplace class and collective actions by fracturing those proceedings and diverting them into individual arbitrations.
Workplace arbitration agreements with class action waivers were one of the most potent tools of employers to manage their risk of class action litigation in 2021. In the time period since the Supreme Court decided Epic Systems, businesses facing class action lawsuits have filed more motions to compel arbitration with a higher rate of success than in the years before this landmark decision.
The latest class action litigation statistics show that, over the past five years, motions to compel arbitration have become an increasingly effective defense to class action lawsuits, particularly since Epic Systems.
The following graphic illustrates the number of motions to compel arbitration that were filed from 2016 to 2021:
Over the past year, plaintiffs’ class action lawyers continued to attempt to find ways to end-run such agreements. These efforts took shape on multiple fronts. In 2021, the plaintiffs’ bar continued to shift its efforts toward claims more apt to be immune from such programs or toward populations less likely to have entered into agreements with the defendants. This trend is illustrated by the spike in filings asserting violations of the California Private Attorneys’ General Act (“PAGA”), which claims, according to current California precedent, are not subject to arbitration based on Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). Such filings have quadrupled over the past decade and, in 2021, continued their upward trajectory. The following graphic illustrates this trend.
In a major turn of events for employers, on December 15, 2021, the U.S. Supreme Court granted a petition for certiorari filed in Viking River Cruises, Inc. v. Moriana, No. 20-1573 (Dec. 15, 2021), to review whether courts can exclude claims brought under the PAGA from federal arbitration requirements, paving the way for a potentially transformative ruling. The Supreme Court’s ruling could dictate the future of the PAGA as a workaround to workplace arbitration, especially as states outside California have considered similar legislation.
On a different front, advocates for workers and labor expanded their efforts to shift this landscape by backing new legislation that would amend federal law to ban mandatory arbitration agreements, depending on the bill, for employment, consumer, antitrust, civil rights, or sexual harassment disputes.
Arbitration agreements have come under increasing scrutiny in recent years, especially with regard to claims for sexual harassment and assault arising during employment. A number of states have attempted to limit employers’ ability to require arbitration of such claims, including states such as California, Maryland, New Jersey, New York, Vermont, and Washington, which have passed statutes in recent years limiting employers’ ability to require arbitration. Most of these efforts, however, have conflicted with the FAA. As a result, worker advocates have targeted their efforts toward amending the FAA or passing laws that limit or prohibit arbitration of workplace disputes.
Multiple proposals have made their way to Congress. In 2021, Senators Kirsten Gillibrand (D-NY) and Lindsey Graham (R-SC) co-sponsored the “Ending Forced Arbitration of Sexual Assault & Sexual Harassment Act of 2021” (S. 2342). The bill has 17 other sponsors, including 10 Democrats and 7 Republicans, and a companion bill introduced in the House (H.R. 4445) has 14 Democratic and 5 Republican sponsors. The Act would amend the FAA to prohibit predispute arbitration agreements, including agreements with class or collective action waivers, for claims involving sexual assault or sexual harassment.
The Resolving Sexual Assault and Harassment Disputes Act of 2021 (S. 3143) was introduced by Senator Joni Ernst (R-IA). The bill would amend the FAA to prohibit arbitration of sexual assault claims and allow for arbitration of sexual harassment claims under limited circumstances. Finally, the Build Back Better Act (H.R. 5376) contains, among many other provisions, language that would overrule the Supreme Court’s decision in Epic Systems by banning collective action waivers in arbitration agreements. This bill passed the House but currently faces unanimous Republican opposition in the Senate. Thus, its prospects are uncertain.
In light of current administrative priorities, the future remains anything but clear as to whether arbitration programs will remain viable tools to counter proposed workplace class actions in the face of continued attacks on Epic Systems. These federal developments suggest that some version of an arbitration bill, particularly if tailored to sexual assault and harassment claims, has a good chance of becoming law.