Lasting Effects of the #MeToo Movement

It has been about a year since the #MeToo movement went viral, spreading greater awareness about sexual misconduct and harassment, and, more generally, the role of women, in the workplace.  So, where are we now, and has anything changed?  Was it just an awareness movement?  Or, have things actually started to shift in the legal landscape with respect to the way employers are required to handle sexual misconduct and harassment?  And what about with the way women are represented at work?  Even if #MeToo may have started out as an awareness movement, states like New York and California are implementing changes in the law that are now imposing, orshutterstock_me too will soon impose, new requirements on employers, in hopes of giving #MeToo a significant, lasting effect.  So, what should employers in New York and California do now?  And, given that these states are often at the forefront of labor and employment issues, how should employers outside New York and California prepare in case new laws are passed in their states?

New York’s New Anti-Sexual Harassment Laws

On April 12, 2018, New York Governor Andrew Cuomo signed into law the 2019 New York State Budget, updating the state’s sexual harassment laws.  Among other changes, there are two key components under these laws.  First, every employer in New York must establish a sexual harassment prevention policy.  These policies should have already been adopted and provided to all employees by October 9, 2018.  The New York Department of Labor and New York Division of Human Rights have established a model sexual harassment prevention policy for employers to adopt.  But employers are not required to use this model, so long as their policy meets or exceeds the minimum standards of the model and set forth in the laws.  Employers must distribute the policy to all employees in writing or electronically, and must ensure that all future employees receive the policy before they start work.  Additionally, employers are encouraged to post a copy where employees can easily access it.

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SCOTUS Approves Class Action Waivers in Employment Arbitration Agreements

By:  Kara Maciel and Dan Deacon

The U.S. Supreme Court ruled on Monday that class/collective action waiver clauses in employment agreements that compel employees to settle disputes individually with a third-party arbitrator are enforceable.  In a landmark 5-4 ruling, the Justices in the majority rejected the National Labor Relations Board’s position and held that a class/collective action waiver in an arbitration agreement – which effectively prohibit employees from joining together in a class or collective action lawsuit to settle disputes – do not violate the Federal Arbitration Act (“FAA”) or the National Labor Relations Act (“NLRA”).

Background

Arbitration agreements – requiring employees to submit claims to an arbitrator instead of filing in court – are relatively common in the workplace.  Many employers favor arbitration because it tends to lower the cost of litigation and streamlines a resolution.

The legal issue that percolated through the federal Courts of Appeals over the past several years was whether a class/collective action waiver in an arbitration agreement is enforceable.  An arbitration agreement that includes a class/collective action waiver benefits an employer because it prevents employees from banning together to file costly class or collective actions and it forces employees to utilize the arbitration process rather than filing a lawsuit.  Thus, the only form of redress for an employee is a single action that must be worked out before a neutral, third-party arbitrator.

Over the past five years, the Courts of Appeals issued conflicting opinions on whether class action waivers are enforceable.   Notably, between 2013 and 2014, employers were provided favorable opinions from the U.S. Courts of Appeals for the Fifth, Second, and Eleventh Circuit which concluded that the NLRA does not invalidate class action waivers in arbitration agreements.  In contrast, in 2016, the U.S. Courts of Appeals for the Ninth and Seventh Circuit adopted the NLRB’s position that class and collective action waivers violate Section 7 of the NLRA.

The Supreme Court’s Decision

The Supreme Court’s ruling brings finality to an issue that sparked years of debate and caused significant uncertainty for employers.  Oral arguments took place in October 2017 with the justices appearing split along ideological lines – except for Justices Clarence Thomas and Neil Gorsuch who did not speak at all during the session.  Interestingly, however, it was Justice Gorsuch who wrote the opinion – which was his first major opinion since joining the Court last spring.

As alluded to in our prior blog post, President Trump’s ability to fill Justice Scalia’s vacancy was ultimately a deciding factor in what appears to have been a partisan showdown.  Speaking for the conservative wing on the bench, Justice Gorsuch explained that the law is clear that Congress in enacting the FAA instructed federal courts to enforce arbitration as written, including those terms calling for individualized proceedings, and that the “decision does nothing to override” what Congress has done.  In a lengthy dissent, Justice Ginsburg criticized the majority for overturning 80 years of NLRB precedent.  Justice Ginsburg commented that the majority’s decision is “egregiously wrong” and expressed concerns that many employees with small claims, such as minimum wage and overtime violations, will be disinclined to pursue potential claims individually.

The expected fall-out and the future of this ruling now rests with Congress.  Congress certainly has the ability to revise the FAA and the NLRA through legislation.  Given the deep split amongst party lines, however, it is unlikely that Congress will act any time soon.

Take Aways for Employers 

In light of the Court’s decision, employers should immediately review their practices and policies governing employment agreements with arbitration clauses.  For those employers who do not require arbitration of disputes, now may be the time to reconsider whether to implement such an agreement with current employees.  For those employers who have arbitration agreements in place already, now is the time to ensure the agreement contains an enforceable class/collective action waiver, especially for wage and hour disputes.  Employers may want to evaluate whether to restrict class/collection actions for other types of disputes, such as discrimination or harassment cases.  Importantly, any arbitration agreement must be drafted with the company culture in mind.

In short, employers now have the ability to utilize a new forum to resolve legal disputes on an individual basis.  In some circumstances, especially for class/collection claims, an arbitration may be less expensive than lawsuits, take less time, and do not typically result in years of appeals.  Ultimately, the Supreme Court’s decision is welcome news for employers.  Employers can proactively mitigate litigation risk through carefully drafted employment agreements and more effectively manage legal disputes.

Supreme Court Nominee Neil Gorsuch Sides with Businesses on Labor Issues

gorsuch-imageOn February 1, 2017, President Trump nominated Neil Gorsuch, a judge on the U.S. Court of Appeals for the Tenth Circuit in Denver, Colorado, to fill the vacancy on the Supreme Court left by Antonin Scalia’s death in February 2016.  Indeed, since February 2016, the High Court has functioned with only eight members; four liberal Justices and four conservative Justices.  Therefore, the confirmation of a ninth Justice to fill the vacant position, and establish a majority conservative bench, is likely to have a substantial impact on the outcome of controversial issues brought before the Court.

Gorsuch was appointed to the Tenth Circuit by President George W. Bush in 2006.  Although he is considered a firm conservative, as was expected given President Trump’s public stance to fill the vacancy with a judge who embodies Scalia’s principles, he has garnered praise from both liberals and conservatives for his work as an appellate judge due to his reputation for conveying his ideas fluently and courteously.

A number of Democrats have already conveyed their opposition to Gorsuch’s nomination, which could prove problematic as he will need to win over some Democratic senators to get the 60 votes needed to clear procedural hurdles. Continue reading

Ninth Circuit Rules that Agreements Precluding Employees from Bringing Class Action Claims Violate Federal Labor Law

In a sweeping ruling with far-reaching implications for California employers, the Ninth Circuit Court of Appeals – the federal appellate court for the Western United States – has concluded in Morris v. Ernst & Young, LLP that an employer violates the National Labor Relations Act (NLRA) by requiring employees to sign agreements precluding them from bringing class action or other collective actions regarding their wages, hours, or other terms and conditions of employment.

This decision presents a significant departure from existing, ever evolving law that employers have been navigating in considering class action waivers. In 2014, the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC held that class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act (FAA) but that representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) are unwaivable under California law. The PAGA has been an egregious enforcement mechanism permitting employees to bring collective actions seeking penalties and attorneys’ fees for wage and hour violations, no matter how minor. The Ninth Circuit in Sakkab v. Luxottica Retail North America, Inc. subsequently ruled that the FAA does not preempt California’s Iskanian rule prohibiting the waiver of representative claims under PAGA.

The path forward following Iskanian and Sakkab for California employers seeking to ensure legal compliance has been to require the waiver of traditional class actions, and not PAGA actions, to avoid running afoul of the law. There has been some security in this position and, indeed, last month the California Supreme Court in Sandquist v. Lebo Automotive, Inc. implicitly recognized the continuing enforceability of class action waivers in deciding a procedural question over whether the arbitrator or judge has authority to determine whether a particular agreement permits or prohibits class action arbitration.

Following Ernst & Young, however, employers located in the Ninth Circuit may now find themselves facing an unfair labor practice charge before the National Labor Relations Board, by seeking to enforce class action waivers or merely inserting such prohibition into arbitration agreements. The Ninth Circuit has reasoned that an employer’s arbitration agreement prohibiting class actions interferes with the right to engage in concerted activity under the NLRA for the purpose of collective bargaining or “other mutual aid or protection.” The Ninth Circuit found that the FAA, which recognizes the enforceability of arbitration agreements, must yield to federal substantive rights such as the right to engage in concerted activities under the NLRA.

It is important to note that the federal appellate courts are divided on this issue, with the Second, Fifth and Eighth Circuits concluding that the NLRA does not invalidate collective action waivers in arbitration agreements and the Seventh Circuit agreeing with the Ninth Circuit’s position. In all likelihood this issue will make it to the U.S. Supreme Court as the final arbiter but until then employers should tread lightly in drafting and seeking to enforce employee arbitration agreements barring collective actions.