United States: Ninth Circuit: Arbitration Agreements Cannot Require Employees To Individually Arbitrate Claims In Separate Proceedings

Last Updated: September 6 2016
Article by John Battenfeld

The Ninth Circuit is the latest court to consider the NLRB's position that class and collective action waivers violate the NLRA; here, the court ruled that an arbitration agreement that completely prevents employees from bringing legal claims together interferes with employees' substantive rights to engage in concerted activity.

On August 22, the US Court of Appeals for the Ninth Circuit issued its decision in Morris v. Ernst & Young, LLP,1 becoming the latest circuit court to consider the position of the National Labor Relations Board (NLRB) that employment arbitration agreements that prevent employees from bringing legal claims together violate the National Labor Relations Act (NLRA). In a two-to-one decision, the Ninth Circuit ruled that employers cannot impose, as a condition of employment, an arbitration agreement requiring employees to arbitrate claims individually that had the effect of barring employees from joining together to bring legal claims in one arbitration. The court agreed with the NLRB that such an agreement violates an employee's substantive right to engage in "concerted activity" protected by Sections 7 and 8 of the NLRA. This decision continues a split among the circuit courts on whether the NLRB's position is correct, which will ultimately need to be decided by the US Supreme Court.


As a condition of employment with Ernst & Young, employees had to sign an arbitration agreement providing that covered disputes pertaining to different employees would be arbitrated individually in separate proceedings. According to the Ninth Circuit, this "separate proceedings" clause required employees to pursue work-related claims individually and so involved a waiver of the right to bring any claims by groups of employees in a single arbitration, including but not limited to class and collective actions.

Morris involved a class and collective action alleging wage and hour claims for violation of the Fair Labor Standards Act and California labor laws. The district court ordered individual arbitration of the two plaintiffs' claims, which the plaintiffs appealed.

The Ruling

The Ninth Circuit reversed the district court's order and held that the "separate proceedings" clause directly interferes with an employee's substantive right under the NLRA to engage in concerted activity—specifically, "the right of employees to pursue work-related legal claims, and to do so together." The court agreed with the NLRB's view that because the ability to act in concert is a substantive right, employers cannot require employees to pursue all work-related legal claims individually in separate proceedings. Under this interpretation, such a "concerted action waiver" that prevents an employee from acting in concert with other employees by joining together to bring their claims in arbitration violates Sections 7 and 8 of the NLRA. Therefore, the court ruled that the "separate proceedings" terms in the contract at issue cannot be enforced.

The Ninth Circuit also found that the Federal Arbitration Act (FAA) did not affect the result because the illegality of the "separate proceedings" provision would be the same if the term was in a contract that required court resolution of disputes. Also, the court viewed the contract as waiving substantive NLRA rights, causing the FAA's mandate to enforce arbitration agreements to yield to another federal law under the FAA's saving clause.

Limitations on the Court's Holding

Although the NLRB takes the position that all arbitration agreements with class or collective action waivers violate the NLRA, the Ninth Circuit opinion does not go this far.

First, the court noted its prior holding in Johnmohammadi v. Bloomingdale's, Inc., that an arbitration agreement with a class and collective action waiver did not violate Section 8 of the NLRA because the employee had the right to opt out of agreeing to individual arbitration and chose not to do so. Second, in Morris, the court refused to enforce an arbitration agreement that required employees to pursue all work-related legal claims individually in separate proceedings. The court did not address whether an agreement that waived only the procedural right to bring claims as a class or collective action in arbitration was unenforceable. Indeed, the Ninth Circuit stated that the distinction between "substantive" and "procedural" rights in federal law was crucial to the result in Morris, as substantive rights cannot be waived in arbitration agreements. The court described the Section 7 rights of employees to pursue legal claims together as a substantive right established by the NLRA that, therefore, cannot be waived. However, the court referred to the right to use class proceedings in federal court as a procedural right that could be waived. Instead of reaching the NLRB's broader conclusion, the Ninth Circuit's holding was that an arbitration agreement cannot be structured to exclude all concerted employee legal claims.

Impact on Employers with Arbitration Agreements

Until the Supreme Court rules on the NLRB's position, employers will face uncertainty, and the enforcement of various arbitration agreements will depend on where the challenge to arbitration is made. For example, the California Supreme Court has rejected the NLRB's position and ruled that class and collective action waivers are enforceable because the NLRA does not override the FAA. The California Supreme Court did not decide, however, whether an agreement that more broadly restricts collective activity (such as prohibiting joint or consolidated claims) would violate the NLRA.

Practical Guidance

Morris clearly holds that arbitration agreements cannot be structured so as to preclude all concerted legal claims by groups of employees. Although other circuit courts have disagreed with this view, employers will have to consider whether to have their arbitration agreements allow joinder of claimants in arbitration (under circumstances where joinder is permitted under FRCP Rule 20) while still prohibiting class and collective action procedures in arbitration. Another option to consider, based on Ninth Circuit law, is providing employees with a clear right to opt out of the arbitration agreement without penalty so that any waiver of the right to bring concerted legal claims is not a mandatory condition of employment. Employers should also consider where challenges to an arbitration agreement will be litigated, as the outcome may be dependent on which federal court, or whether a state court, decides the challenge.


1 No. 13-16599 (9th Cir. Aug. 22, 2016).

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions