Ron Chapman Says SCOTUS Nominee Gorsuch Likely Would Uphold Class-Action Waivers

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In a March 2017 interview, Ron Chapman Jr. discusses the utilization of class-action waivers in arbitration agreements and employer best practices pending the U.S. Supreme Court’s decision in Ernst & Young LLP v. Morris , No. 16-300, Epic Systems Corp. v. Lewis, No. 16-285, and National Labor Relations Board v. Murphy Oil USA Inc., No. 16-307, as well as the potential role of Judge Neil Gorsuch, President Donald Trump’s Supreme Court nominee, in the decision.

Ron Chapman, Jr.

Ron Chapman Jr. (interviewed by Katherine C. Parris)

Ron Chapman Jr. ( ron.chapman@ogletree.com) is a shareholder at Ogletree Deakins’ Dallas office. He has defended employers in more than 25 states and the U.S. Virgin Islands and regularly provides counseling to clients on both legal and practical issues. He also has extensive appellate experience. Chapman serves on the firm’s board. He is board certified in labor and employment law by the Texas Board of Legal Specialization. The International Law Office named him the overall winner for the entire United States and the exclusive winner for Texas in the Employment and Labor category for its Client Choice awards. Chapman was the lead counsel in D.R. Horton Inc. v. National Labor Relations Board, No. 12-60031.

Bloomberg BNA:

What are some advantages and disadvantages in including class-action waivers in employment arbitration agreements?

Chapman:

There certainly are advantages and disadvantages to having an arbitration agreement, but if an employer has an arbitration agreement, there is no disadvantage to having a class-action waiver in it.

In fact, the class-action waiver is the primary advantage to having an arbitration agreement in the first place, as it outweighs many of the negatives, such as the reduced likelihood of winning summary judgment, the risk of an arbitrator “splitting the baby” and the fees the employer must pay to the arbitrator.

Bloomberg BNA:

How may Judge Neil Gorsuch’s stance affect the future of class-action waivers if he is confirmed?

Chapman:

If, as expected, Judge Gorsuch is confirmed before the U.S. Supreme Court and considers the class-action waiver cases, he very well could cast the deciding vote. Right now there is a bit of a deadlock, with the National Labor Relations Board continuing to find class-action waivers unlawful and most courts rejecting that position.

Judge Gorsuch hasn’t ruled on this precise issue previously, and obviously, no one knows how he will rule if called upon to do so. However, Judge Gorsuch’s past decisions and writings suggest that he’s likely to vote to uphold the use of class-action waivers, as most courts to have considered the issue have ruled.

Bloomberg BNA:

What trends have you observed in terms of employers including or excluding class-action waivers in employee arbitration agreements and are there any geographical differences?

Chapman:

Arbitration agreements with class-action waivers have become much more prevalent in recent years, in the wake of Supreme Court cases validating their use. While there’s currently a circuit split on whether class-action waivers are permissible for non-supervisory employees, the Supreme Court should resolve that issue, thereby eliminating any geographical differences.

Bloomberg BNA:

How can employers and their legal counsel prepare pending the Supreme Court’s decision? Should employers continue to include class-action waivers?

Chapman:

If an employer already has an arbitration agreement with a class-action waiver, there’s no reason to alter that course right now. If an employer doesn’t yet have an arbitration agreement with a class-action waiver, it may want to wait until after the Supreme Court rules to determine whether to adopt one, as the court’s decision may affect the pros and cons of having an arbitration agreement and/or the wording needed in such an agreement.

There are two primary disadvantages to waiting to roll out an arbitration agreement with a class-action waiver until after the Supreme Court’s ruling. First, the employer may get sued in a class action between now and then. Second, the process of weighing the pros and cons of arbitration, drafting the agreement and planning the logistics of the rollout of the agreement takes some time. Proactive employers may want to start that process now, tweak the agreement as needed based on the Supreme Court’s ruling and then roll out the agreement immediately after the ruling.

Bloomberg BNA:

What alternatives, if any, to class-action waivers do employers and their counsel have when drafting employee arbitration agreements?

Chapman:

Many arbitration agreements contain an opt-out provision, allowing the employee to opt out within a certain amount of time. This can help negate many of the challenges to arbitration agreements, such as the contention that the agreement was forced upon the employee, as it reinforces that the agreement is voluntary.

Bloomberg BNA:

What innovative litigation strategies and arguments have you witnessed in defending against class-action waiver claims, and how will the outcome of the Supreme Court’s decision affect the utilization of them?

Chapman:

In a few instances, we’ve had to seek an injunction prohibiting an arbitrator from ignoring the class-action waiver in an arbitration agreement. Hopefully, the Supreme Court will resolve any remaining uncertainty on the validity of class-action waivers, thereby making satellite litigation over their enforceability unnecessary.

Bloomberg BNA:

How do you predict the Supreme Court’s decision may affect how employers resolve employee workplace claims in the future?

Chapman:

I’ve studied every court decision ever issued on the validity of class-action waivers. In the end, I think the Supreme Court will adopt the view of the vast majority of courts to have considered the issue and validate the use of such waivers. Ultimately, this will help both employers and employees resolve bona fide disputes more quickly.

I suspect there will be something in the Supreme Court’s ruling necessitating that the language in most arbitration agreements be tweaked. The precise wording in an arbitration agreement is extremely important. Having unlawful language or excluding required language can result in the agreement being invalid. Also, there are several key strategic decisions an employer needs to make in tailoring an arbitration agreement to its particular workforce. One size doesn’t necessarily fit all.

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