Texas Employers Are Protected From Class Action Suits (For Now)
The Fifth Circuit Court of Appeals upholds employer’s use of class action waivers in the employment context
Employers may require employees to sign class action waivers as a condition of employment, and the Fifth Circuit has made it clear that such waivers will be enforceable against employees - preventing them from litigating disputes as a class or collective action. Convergys Corp. v. National Labor Relations Board, No. 15-60860 (5th Cir. Aug. 07, 2017), available at http://caselaw.findlaw.com/us-5th-circuit/1869998.html.
This ruling is good news for Texas employers because defending class action lawsuits often results in costly legal fees and the potential for large verdicts against the company. Utilizing class action waivers, either as part of an arbitration agreement or an employment contract, forces employees to bring any disputes with the company as individual claims - saving both time and money for employers.
However, this employer protection may not last for long - there is currently a split among circuit courts regarding whether such waivers are valid and enforceable in the employment context. The United States Supreme Court is expected to address the issue this term with the three consolidated class action waiver cases which are currently pending before the Court.
The circuit court split is the result of varying interpretations of Section 7 of the National Labor Relations Act (NLRA) which, “guarantees employees the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Additionally, Section 8 of the NLRA makes it an “unfair labor practice” for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”
In the Convergys Corp. case, the National Labor Relations Board argued that class action waivers are unenforceable because they violate an employee’s rights under Section 7 of the NLRA to “engage in other concerted activities.” However, the Fifth Circuit ultimately rejected this argument and reiterated its view that the NLRA does not give employees any substantive right to bring class actions suits; rather, the right to bring suit as a class action is procedural. This distinction between what the court classifies as a substantive vs. a procedural right is important because substantive rights cannot be waived, while procedural rights may be waived.
Oral arguments before the Supreme Court are set to begin in October. However, until a decision is reached by the Court, employers in Texas will remain protected from class action suits by employees who have signed such waivers as part of their employment agreement.
This article is presented by the Dallas employment lawyers at Clouse Dunn LLP. To speak to an employment attorney about employment law matters for either employees or employers, send an email to email@example.com or call (214) 239-2705.
About Keith Clouse / Dallas Employment Attorney Keith Clouse
Keith Clouse is an employment law specialist with over 25 years of experience representing senior executives, business owners, physicians, and corporations in complex employment litigation, arbitration and negotiations. Senior executives, physicians and other professionals consistently rely on Mr. Clouse for employment law expertise and advice on employment contracts, covenants not to compete, severance agreements, equity awards, trade secret disputes, and breach of fiduciary duty claims. Source CDKLawyers.com
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