Wage and Hour Defense Blog

In Elijah Baer, et al. v. Tesla Motors, Inc., fifteen plaintiffs filed a putative class and Private Attorneys General Act (“PAGA”) representative action lawsuit against Tesla, Inc. (“Tesla”) alleging wage-hour violations of California law. Two of the plaintiffs were employed by Staffmark Investment LLC (“Staffmark”) – a non-party staffing agency – and assigned to work at Tesla for a period in 2020. The other plaintiffs were direct former or current employees of Tesla going back to 2017. After Tesla removed the action to federal court, it moved to compel arbitration.

The plaintiffs signed various arbitration agreements throughout their employment. From the fall of 2018 to May 2022, Tesla utilized a recruiting software called Averture. According to Tesla, Averture required applicants to create a secure online profile with their own personal information. Eight of the plaintiffs signed offer letters with Tesla through Averture containing an arbitration provision. These plaintiffs did not dispute that they signed, and Tesla countersigned, the offer letters.

At some point in 2022, Tesla stopped using Averture and started using a system called Inside Tesla. The security measures applicable to Averture were largely the same as those employed by Inside Tesla; however, applicants who were offered employment under Inside Tesla signed an offer letter and a standalone arbitration agreement. Four of the plaintiffs signed arbitration agreements through the Inside Tesla system.

Here’s a question you likely have never considered: Are hackers overseas infiltrating employers’ computer systems just to sign arbitration agreements with class action waivers for random employees?

While there is no evidence that this has ever happened anywhere, and no logical reason why it would, plaintiffs’ lawyers and even some courts seem to believe this could happen. And that is at the heart of the latest battleground over arbitration agreements with class actions waivers.

Since the United States Supreme Court’s decision in Epic Systems v. Lewis, more and more ...

The U.S. Supreme Court’s June 15, 2022 decision in Viking River Cruises v. Moriana could have a tremendous impact upon pending and future litigation, as well as employment practices in the state.

For some California employers, it will impact pending Private Attorneys General Act (“PAGA”) litigation where the named plaintiff has an arbitration agreement with a class and representative action waiver.

In a recent post addressing the U.S. Supreme Court oral argument in Viking River Cruises v. Moriana, we mentioned that employers in California will want to consider the “pros and cons” of arbitration agreements should an employer-friendly decision be issued in that case, rather than rush to implement them.

In response, more than a few people have asked the same or similar questions -- What are the “cons” of arbitration agreements? Why wouldn’t an employer want to use arbitration agreements, particularly if they will foreclose Private Attorney General Act (“PAGA”) actions in California?

There are “cons” to these agreements -- and they are not insignificant.

Since the Supreme Court issued its seminal 2018 decision in Epic Systems Corp. v. Lewis, acknowledging that the Federal Arbitration Act (“FAA”) permits the use of arbitration agreements with class action waivers, many employers have implemented arbitration programs for their employees. Those arbitration programs have been aimed, in no small part, at avoiding the class and collective actions that have overwhelmed employers, particularly in California.

In response, California passed AB 51, which prohibits imposing “as a condition of employment, continued employment, or the receipt of any employment-related benefit” the requirement that an individual “waive any right, forum or procedure” available under the California Fair Employment and Housing Act (“FEHA”) and Labor Code.

Given the ever-increasing number of wage-hour class and collective actions being filed against employers, it is no surprise that many employers have turned to arbitration agreements with class and collective action waivers as a first line of defense, particularly after the United States Supreme Court’s landmark 2018 Epic Systems v. Lewis decision.

If there is a common misconception about Epic Systems, however, it is that the Supreme Court concluded that all arbitration agreements with all employees are enforceable under all circumstances.  The Court reached no such ...

As we wrote here recently,  two federal courts in California rejected Postmates’ attempt to escape having to defend thousands of individual arbitrations filed by drivers contending they have been misclassified as independent contractors. Those decisions require Postmates to pay millions in arbitration fees alone.

A federal court in Illinois has now reached the same conclusion, holding that Postmates must proceed with more than 200 individual arbitrations that will cost Postmates $11 million in arbitration fees.

Arbitration agreements with class action waivers have become ...

We have written here about the efforts of several gig economy companies like DoorDash to avoid having to conduct – and pay for – thousands of individual arbitrations alleging that their workers had been misclassified.

As we have said before, companies that implement arbitration agreements with class action waivers must be careful what they ask for.  By using such agreements, they run the risk of dozens, hundreds or even thousands of individual arbitrations, the cost of which could threaten the companies’ very existence.  (In California, we estimate that the arbitration costs ...

Recently, we wrote here about a federal court order requiring DoorDash to conduct more than 5,000 individual arbitrations under the terms of its mandatory arbitration agreements, with each arbitration to address claims that it had misclassified its drivers as independent contractors.

The order would fall in the category of “Be Careful What You Wish For.”  In seeking to avoid class or collective actions by having employees sign arbitration agreements with class action waivers, employers face the possibility of hundreds or thousands of individual arbitration for which they ...

It’s no secret that many employers have employees sign arbitration agreements with class and collective action waivers in the hopes of avoiding the massive wage-hour lawsuits that have become so prevalent in the past two decades.

Nor is it any secret that, following the U.S. Supreme Court’s decision in Epic Systems affirming that such agreements can be valid, even more employers have chosen to use them with their workforces.

But, in discussing with clients whether to implement such agreements, lawyers worth their salt have always told their clients this: “Be careful what you ...

As we wrote here, United States District Court Judge Kimberly J. Mueller of the Eastern District of California wrote a brief “minute order” explaining that she was issuing a preliminary injunction to halt enforcement of California’s controversial anti-arbitration law, known as AB 51.

The new law, which was set to go into effect on January 1, 2020, would outlaw mandatory arbitration agreements with employees. AB 51 would also prohibit arbitration agreements that would require individuals to take affirmative action to be excluded from arbitration, such as opting out.  ...

The California Legislature’s attempt to circumvent both the Federal Arbitration Act (“FAA”) and the Supreme Court’s landmark decision in Epic Systems by crafting a new law prohibiting California employers from requiring employees to enter into arbitration agreements is off to a rocky start in the courts, to say the least.

As discussed below, a federal court has issued a preliminary injunction enjoining enforcement of California’s controversial new anti-arbitration statute known as AB 51.  Barring some new development, it now appears clear that the statute cannot be ...

We recently wrote about a new California law set to go into effect on January 1, 2020 that would outlaw mandatory arbitration agreements with employees.

The new law, known as AB 51, would also prohibit arbitration agreements that would require individuals to take affirmative action to be excluded from arbitration, such as opting out.  The law would also appear to extend to jury waivers and class action waivers. And it would include criminal penalties.

An eleventh-hour court order will keep that statute from being enforced, at least for a few days.

On December 29, 2019, just days before ...

As employers with operations in California had feared, Governor Gavin Newsom has signed AB 51, which effectively outlaws mandatory arbitration agreements with employees – a new version of a bill that prior Governor Jerry Brown had vetoed repeatedly while he was in office.

The bill not only prohibits mandatory arbitration agreements, but it also outlaws arbitration agreements in which employees must take an affirmative action to escape arbitration, such as opting out.

And as the statute is written in broad terms that extend to waivers of statutory “procedures,” it appears to ...

Earlier this year, in New Prime, Inc. v. Oliveira, 586 U.S. __, 139 S. Ct 532 (2019), the United States Supreme Court held that the Federal Arbitration Act (“FAA”) does not apply to arbitration agreements with independent contractors who are engaged in interstate commerce.  The Supreme Court did not address whether such agreements could be enforced through other laws.

Now, two different panels of the New Jersey Appellate Division have rendered decisions addressing this unresolved issue.  Those panels, however, reached different conclusions regarding whether the arbitration ...

On January 15, 2019, the U.S. Supreme Court issued a unanimous decision in New Prime Inc. v. Oliveira, a case concerning the enforceability of arbitration agreements.

Petitioner New Prime Inc. (“New Prime”) is an interstate trucking company that engaged Dominic Oliveira to perform work as a driver pursuant to an “Independent Contractor Operating Agreement,” containing both an arbitration clause and a delegation clause giving the arbitrator authority to decide threshold questions of arbitrability.

Oliveira filed a putative class action against New Prime in federal ...

Three months ago, the United States Supreme Court issued its decision in Epic Systems Corp. v. Lewis, holding that the National Labor Relations Act (“NLRA”) does not prevent the use of arbitration agreements with class and collective action waivers covered by the Federal Arbitration Act (“FAA”). (See our discussion of Epic here.) The Court of Appeals for the Sixth Circuit has now similarly concluded in Gaffers v. Kelly Services, Inc., that the Fair Labor Standards Act (“FLSA”) does not bar such arbitration arrangements. While this is not a surprising outcome in light ...

Featured on Employment Law This Week: The U.S. Supreme Court takes on class action waivers.

In 2012, the National Labor Relations Board (NLRB) ruled that class action waivers in arbitration agreements violate employees’ rights under the National Labor Relations Act (NLRA). The U.S. Court of Appeals for the Second, Fifth, and Eighth Circuits disagreed, finding that these waivers do not violate the NLRA and are enforceable under the Federal Arbitration Act. More recently, the Seventh and Ninth Circuits sided with the NLRB on the issue. The Supreme Court will consider three ...

On January 13, 2017, the United States Supreme Court granted certiorari to hear three cases involving the enforceability of arbitration agreements that contain class action waivers.

Whether such agreements are enforceable has been a hotly contested issue for several years now, particularly in cases involving wage-hour disputes.

The Fifth Circuit has held that such waivers can be enforceable (NLRB v. Murphy Oil, Inc.), joining the Second and Eighth Circuits in that conclusion. The Seventh (Epic Systems, Inc. v. Lewis) and Ninth Circuits (Ernst & Young LLP v. Morris) have held that ...

In a case that has strategic implications for employers’ use of arbitration agreements in response to collective claims brought under the Fair Labor Standards Act (“FLSA”), the Eighth Circuit has held that former servers at an Arkansas pizzeria chain lack standing to challenge the pizzeria’s enforcement of an arbitration agreement that bars current employees from joining the FLSA collective action.  Conners v. Gusano’s Chi. Style Pizzeria, No. 14-1829 (8th Cir. Mar. 9, 2015).

In Conners, the plaintiff filed a proposed collective action lawsuit on behalf of herself and ...