In this issue of the Class Action Trends Report, Jackson Lewis attorneys discuss recent developments in arbitration and their impact on employment class actions. These include the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, several impactful U.S. Supreme Court decisions, and the emergence of mass arbitration.

Access the latest Jackson Lewis Class Action Trends Report here.

 

Bilateral arbitration agreements governed by the Federal Arbitration Act (FAA) may require arbitration of California Private Attorneys General Act (PAGA) claims on an individual basis only, the U.S. Supreme Court has held. Viking River Cruises, Inc. v. Moriana, No. 20-1573 (June 15, 2022).

The Court’s decision overrules the California’s Supreme Court decision in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), to the extent Iskanian effectively required PAGA claims to be adjudicated in court on a representative basis.

Court’s Decision

The question before the Court was whether the FAA preempts a rule of California law articulated in Iskanian that invalidated provisions in arbitration agreements that waive the right to assert representative claims, including representative claims under PAGA.

To start, the Court stated that the FAA does not establish a categorical rule mandating enforcement of representative action waivers, including waivers of the right to assert claims on behalf of absent principals, such as California’s Labor Workforce Development Agency (LWDA), in any forum. To that extent, the Court concluded that the FAA does not preempt California law and does not require enforcement of wholesale representative action waivers.

The Court held that California’s rule is preempted by the FAA to the extent California precludes division of PAGA actions into individual arbitrable claims and non-individual, non-arbitrable claims. The Court held that PAGA’s built-in mechanism of claim joinder conflicts with the FAA. It stated that Iskanian’s prohibition on the contractual division of PAGA actions unduly circumscribes the freedom of parties to determine the issues subject to arbitration. Further, it held the mechanism violates the fundamental principle that arbitration is a matter of consent. In this respect, the Court concluded that California law is preempted by the FAA.

How these principles came together was dictated by the severability provision in Viking River Cruises Inc.’s arbitration agreement. The severability provision in the agreement provided that, if the representative action waiver was found invalid in some respect, any “portion” of the waiver that was still enforceable would be enforced in arbitration. Relying on this provision, the Court concluded the representative action waiver in Viking’s arbitration agreement remained invalid to the extent that, contrary to Iskanian, the waiver attempted to prevent the employee, Angie Moriana, from asserting a representative action altogether. The Court explained, the waiver was partially enforceable to the extent it required individual arbitration of Moriana’s PAGA claim. Further, the Court held that the non-individual representative aspect of the PAGA claim could not be maintained in court and was subject to dismissal because PAGA provides no mechanism to give an individual standing to proceed in court once the individual claim has been committed to arbitration.

Takeaway

Employers doing business in California should determine if an arbitration agreement pertaining to employment claims is suitable for their workforce. In addition, employers that currently utilize arbitration agreements for their workforce should review any representative action waiver and severability provisions to determine if they are sufficient to assist with compelling arbitration when a PAGA claim is alleged.

Please contact a Jackson Lewis attorney with any questions about this case, the FAA, PAGA, or arbitration agreements.

 

Individuals employed as ramp workers who frequently handle cargo for an airline are “transportation workers” exempt from the Federal Arbitration Act (FAA), the U.S. Supreme Court has held. Southwest Airlines Co. v. Saxon, No. 21-309 (June 6, 2022). Therefore, the employees are not required to arbitrate their wage-hour claims under the FAA, but may still be subject to arbitration under state law.

The FAA’s transportation worker exception excludes from FAA coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1.  In recent years, the scope of the exception  has emerged as a significant issue in class action litigation. In this case, the narrow question the Supreme Court addressed to resolve a circuit split was “[w]hether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.” The Supreme Court made clear that, when determining whether workers qualify for the FAA’s transportation worker exception, the analysis turns on the specific duties those workers perform and not the company or industry in which the workers are engaged.

A more detailed analysis of the Supreme Court’s decision can be found here.

For more on the decision, see Jackson Lewis’ California Workplace Law Blog.

Since 2017, more than 1,500 class action lawsuits have been filed under the Illinois Biometric Information Privacy Act (BIPA) and the cases show no signs of slowing. These claims continue to vex Illinois businesses, and multi-state companies that have operations within Illinois.

Several other states have enacted biometric privacy laws, and legislation similar to the BIPA is pending in several state legislatures. Furthermore, a number of states have added biometric information to the categories of personal data that require notification under their respective breach notification laws. Local governments also have begun to regulate the use of biometric technologies. Several municipalities prohibit the use of facial recognition technology or require notice prior to the collection of biometric data. Additional states and municipalities can be expected to adopt biometric privacy measures as the expanding use of biometric technology coincides with a sharp rise in public wariness about privacy risks.

On May 5, Jackson Lewis P.C. attorneys will offer a webinar on the current state of BIPA litigation in Illinois, including trends and new theories which have been emerging from the plaintiffs’ bar. In addition, the webinar will include an overview of other state and local biometric privacy laws to help multi-state employers ensure they are compliant with the ever-growing patchwork of privacy laws throughout the United States.

Jackson Lewis attorneys also will provide insights about common compliance gaps as well as practical suggestions about how to mitigate risk to your organization, including the potential use of arbitration agreements or class action waivers.

Click here for more information, and to register: Biometric Privacy Claims: Tips to Avoid Claims and Mitigate Exposure.

In the latest court ruling to address personal jurisdiction over out-of-state opt-in plaintiffs in Fair Labor Standards Act collective actions, a federal district court in North Carolina held that it lacked jurisdiction over individuals who did not work for the defendant employer within the state, were not hired in the state, or whose employment with the defendant was not otherwise related to the state. In so ruling, the court determined that the U.S. Supreme court’s decision in Bristol-Myers Squibb Co. v Superior Ct. of Cal, 137 S. Ct. 1773 (2017), applies to FLSA collective actions. Speight v. Labor Source, LLC, No. 4:21-CV-112. (E.D.N.C. Apr. 19, 2022).

In Bristol-Myers Squibb Co., the Supreme Court held that a federal court in California lacked jurisdiction over out-of-state plaintiffs in a mass tort action. Since that decision, federal courts have had to grapple with whether the holding applies to collective actions brought under Sec. 216(b) of the Fair Labor Standards Act (FLSA), and to class action suits brought under Rule 23 of the Federal Rules of Civil Procedure. Several federal circuit courts of appeal have weighed in—offering conflicting precedents—but the U.S. Court of Appeals for the Fourth Circuit (which includes Maryland, North Carolina, South Carolina, Virginia, and West Virginia) has yet to address Bristol-Myers, either under the FLSA or in the context of Rule 23 class actions.

The lawsuit

Billy Speight brought a putative collective action against Labor Source, LLC, a staffing agency that provides laborers for project work, which has offices in several states and a principal office in Kansas. Speight, a North Carolina resident, was hired in the agency’s Goldsboro, North Carolina office and worked on projects in North Carolina and other states over the brief course of his employment. Speight filed an FLSA suit and sought to conditionally certify a nationwide collective of current and former staffing agency employees. Arguing that the court did not have jurisdiction over the claims brought on behalf of potential opt-in plaintiffs outside North Carolina, Labor Source filed a partial motion to dismiss.

The district court granted the employer’s motion as to the claims of potential opt-in plaintiffs whose claims did not arise out of activities within the state, concluding that Bristol-Myers applies to FLSA collective actions.

Plaintiffs’ unsuccessful arguments

The plaintiffs contended that Bristol-Myers requires the court to focus on the “suit” as a whole rather than the individual “claim” in evaluating personal jurisdiction and that in FLSA collective actions, there is no need for an independent bases to exercise personal jurisdiction over a defendant as to opt-in plaintiffs. The court rejected this reasoning.

The court also rejected the plaintiffs’ argument that the Fourteenth Amendment’s “minimum-contacts” standard (the animating legal question in Bristol-Myers) applies only to states. Bristol-Myers had left open the question whether the Fifth Amendment, which applies to federal court jurisdiction, contains the same jurisdictional restrictions that the Fourteenth Amendment imposes on state courts. The district court, however, observed that “the Fourth Circuit has consistently counseled that the Fourteenth Amendment’s constraints on the forum state’s courts’ exercise of personal jurisdiction are pertinent to the personal jurisdiction inquiry for a federal court in that state[.]”

Also rejected: the plaintiffs’ assertion that the FLSA’s remedial purpose warrants the court’s exercise of jurisdiction over out-of-state opt-in plaintiffs.

Fourth Circuit courts are divided

Although the district court in Speight found that Bristol-Myers applies to FLSA collective actions, the same court has held that the Bristol-Myers holding does not apply in Rule 23 class actions (Hicks v. Houston Baptist University, E.D.N.C. 2019). (Several other district courts within the circuit have found Bristol-Myers inapplicable in the Rule 23 context as well.) However, the court in Speight explained that FLSA collective actions are “instructively distinguishable from the nature of a Rule 23 class action.” The court observed the “distinct statutory scheme” of the FLSA’s opt-in requirement and saw the distinction as a reason to require that opt-in plaintiffs “must present independent, sufficient bases for exercise of the court’s specific personal jurisdiction over that claim in reference to the defendant.”

Because the question of whether federal courts can exercise jurisdiction over out-of-state parties in class and collective actions has taken on growing significance, it’s likely the Fourth Circuit will be pressed into addressing the issues and resolving the internal circuit split.

For employers, 2021 was a challenging year. The post-election landscape, evolving federal and state law, and the effects of a seemingly endless global pandemic created a difficult business climate. Efforts to contain the spread of COVID-19 were met with stiff resistance — legal and otherwise; still, employers persist in earnest to maintain their operations safely and efficiently. However, 2021 brought other important, non-COVID-19 developments as well.

Our latest issue of the Class Action Trends Report offers a snapshot of the most significant employment-related class action activity from the tumultuous year. We look at vaccine mandate litigation, significant procedural decisions, wage and hour suits, and the continuing rise of cases brought under the California Private Attorneys General Act and Illinois Biometric Information Privacy Act, among other litigation trends.

Click here for the Winter 2022 Class Action Trends Report.


Do you have feedback on this issue? Is there a topic you would like to see in a forthcoming Class Action Trends Report? Contact the editors.

A new law making predispute arbitration agreements and class action waivers covering sexual assault and sexual harassment claims invalid and unenforceable has passed in Congress and is headed to President Joe Biden’s desk.

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 amends the Federal Arbitration Act (FAA) to give employees who are parties to arbitration agreements with their employers the option of bringing their claims of sexual assault or sexual harassment in arbitration or court. President Biden reportedly is expected to sign it shortly.

See our Jackson Lewis legal alert for more details on the legislation, including a discussion of what employers need to know.