Are We All in This Together? Enforcing Class Arbitration Waivers

By Kiefer, Ariel Monroe | Missouri Law Review, Summer 2017 | Go to article overview

Are We All in This Together? Enforcing Class Arbitration Waivers


Kiefer, Ariel Monroe, Missouri Law Review


Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016)

I. INTRODUCTION

Mandatory class arbitration waivers are increasingly common in employment agreements. (1) It is estimated that forty-three percent of companies have mandatory class arbitration waivers. (2) Employees sign them because they either do not believe they will ever have a major problem with their employer, they believe arbitration is a cheaper and faster method of dispute resolution, or they simply do not read or understand the clause. (3) Employees should question class action waivers because they take away employees' access to the court system and their right to collective action. (4) If employees cannot go to the courts or act collectively to enforce their rights, the country might stop making progress or even lose the progress it is making in protecting workers from discrimination, unjust termination, and unfair wages due to a lack of recourse against illegal actions by employers. (5) For example, unions are able to secure better wages and working conditions for employees than employees are able to secure on their own. Additionally, employees are less likely to win in individual arbitration than they are in an individual lawsuit. (6) If they do win in individual arbitration, they generally recover less than employees who file individual lawsuits. (7) The average damage award in federal courts is $176,000, while the average award in arbitration is only $36,000. (8) Because class action waivers have a heavy impact on employee rights, courts must carefully analyze the legality of the waivers.

Part II of this Note discusses the facts surrounding the Eighth Circuit's decision in Cellular Sales of Missouri to uphold a class arbitration waiver. Part III of this Note analyzes the approach other federal circuit courts have taken in upholding and striking down class arbitration waivers. Part IV explains the Eighth Circuit's rational for upholding the class arbitration waiver. Finally, Part V discusses why the Eighth Circuit should not have upheld the waiver.

II. FACTS AND HOLDING

John Bauer worked for Cellular Sales, an authorized Verizon Cellphone retailer. (9) As a condition of employment, the company required employees to sign an agreement mandating that "[a]ll claims, disputes, or controversies... shall be decided by arbitration" and only in "an individual capacity and not as a plaintiff or class member in any purported class, [or] collective action." (10) After Bauer's employment ended, he filed a class action lawsuit against Cellular Sales. (11) He alleged that Cellular Sales violated the Fair Labor Standards Act ("FLSA") (12) in several ways, including failure to pay overtime and improper deductions from his wages. (13) Cellular Sales moved to dismiss the action pursuant to the employment agreement's mandate that claims be settled through individual arbitration. (14) The district court held that the agreement was enforceable and dismissed the case. (15) While the class action suit was pending, Bauer filed a charge with the National Labor Relations Board ("NLRB"). (16)

In response to Bauer's charge, the NLRB filed a complaint on Bauer's behalf claiming that Cellular Sales' employment agreement violated the National Labor Relations Act ("NLRA"). (17) The charge alleged that Cellular Sales' requirement that employees agree to individual arbitration violated the employees' right to engage in concerted activity. (18) The NLRA gives employees the right to "engage in other concerted activities for the purpose of... mutual aid or protection." (19) Additionally, the NLRA states that it is an "unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title." (20) Cellular Sales argued that the NLRB's D.R. Horton decision, which held that agreements prohibiting class arbitration were invalid, should not be followed in this case because the holding was contrary to Supreme Court of the United States precedent and the Federal Arbitration Act ("FAA"). …

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