Wage & Hour Class and Collective Action Review — 2023 - Report - Page 16
and sizes updated their employee onboarding materials and employment agreements to
require that any disputes be resolved in arbitration on an individual basis. To date,
companies have enjoyed a high rate of success enforcing those agreements and using
them to thwart wage & hour class and collective actions out of the gate. In recent years,
the Supreme Court’s decisions generally expanded the arbitration defense, and thus
made it more difficult for the plaintiffs’ bar to pursue wage & hour claims on a class-wide
or collective action basis.
After expanding this defense for defendants over the past decade, for the first year we
can recall, the Supreme Court issued two decisions that arguably pull back on and
weaken the defense for defendants.
In Southwest Airlines Co. v. Saxon, et al., 142 S.Ct. 1783 (2022), the Supreme Court
narrowed the application of the Federal Arbitration Act by expanding its so-called
“transportation worker exemption.” The Supreme Court held that “any class of workers
directly involved in transporting goods across state or international borders” falls within
§ 1 of the FAA, which exempts certain workers from the Act’s coverage. Id. at 1789. As
a result of the Supreme Court’s decision, the courthouse doors are open to more
plaintiffs since contracts with workers who engage in the process of transportation
across state lines are not enforceable under the FAA. Thus, employers will need to turn
to state law to attempt to enforce those agreements, and the arbitration provisions
contained therein.
The U.S. Supreme Court also broadened the circumstances that may give rise to a
defendant’s waiver of the arbitration defense in Morgan, et al. v. Sundance, Inc.,
142 S.Ct. 1708 (2022). There, the employer defendant failed to raise the arbitration
provision as an affirmative defense and litigated for eight months before attempting to
compel arbitration under the FAA. Id. at 1711. The Supreme Court reversed the
decisions of the district court and U.S. Court of Appeals for the Eighth Circuit, which
held that although a showing of prejudice is not a feature of federal waiver law
generally, the requirement should apply to waiver of the right to arbitration because of
the “federal policy favoring arbitration.” Id. at 1712. Instead, the Supreme Court
concluded that a court must hold a party to its arbitration contract just like any other
contract but may not devise novel rules to favor arbitration over litigation. Id. at 1713.
As a result of the Supreme Court’s decisions in 2022, chinks in the armor of the
arbitration agreement defense have begun to grow. Given the impact of the arbitration
defense, in 2023, companies may face additional hurdles on the judicial front as the
plaintiffs’ bar continues to look for workarounds.
C.
The Growing Prevalence Of Personal Jurisdiction Defenses
Just like arbitration, corporate defendants in 2022 vigorously asserted defenses based
on a lack of personal jurisdiction to eliminate or curtail wage & hour class actions, and
collective actions in particular. In the case of Bristol-Myers Squibb Co. v. Superior Court
of California, San Francisco County, 137 S. Ct. 1773 (2017), the U.S. Supreme Court
ruled that every plaintiff in a mass action needs to establish grounds for the court to
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© Duane Morris LLP 2023
Wage & Hour Class And Collective Action Review – 2023