New York Appeals Court Rejects Enforceability of Class Action Waivers – But Is This Ruling Short-Lived?
In an issue of first impression in the state of New York, last week the New York Supreme Court, Appellate Division (the state’s intermediate appellate court) weighed in on the enforceability of arbitration provisions that preclude employees from pursuing claims on a class, collective or representative basis. The appeals court concluded that such provisions are in violation of the National Labor Relations Act and therefore are unenforceable. Gold v. New York Life Insurance Co., 2017 N. Y. App. LEXIS 5627 (N.Y. App. Div. July 18, 2017). In so holding, the court of appeals sided with the federal U.S. Courts of Appeal for the Sixth, Seventh and Ninth Circuits. NLRB v. Alternative Entertainment, Inc., 858 F.3d 393 (6th Cir. 2017); Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016).
However, as the appeals court noted, an equal number of federal U.S. Courts of Appeal have held that such class/collective action waiver provisions do not violate the NLRA and instead are consistent with the purposes of the Federal Arbitration Act (FAA). Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013); Murphy Oil Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2nd Cir. 2013).
Will this state appellate ruling have any long-lasting practical effect? That depends, for as the appeals court noted, “[i]n all likelihood, the United States Supreme Court will resolve this circuit split in due course.” In fact, the Supreme Court has agreed to take up the matter, granting certioriari in a consolidated manner in Murphy Oil, Lewis and Morris. The potential outcome of the appeal became even more interesting when, just over a month ago, the Office of the Solicitor General, on behalf of the Trump administration, reversed its Obama-era position and filed an amicus brief supporting the enforceability of class/collective action waiver provisions. Notably, just last week the Supreme Court set oral argument for October 2, 2017, the first day of the Court’s upcoming session. Thus, no later than the spring of 2018, we expect this issue to be resolved.