Week's Best Posts

As a condition of employment, Ernst & Young’s employees were required to sign agreements that contained a “concerted action” waiver requiring employees to pursue legal claims against E&Y exclusively through arbitration, and arbitrate only as individuals in “separate proceedings”. An employee brought a class action against E&Y in the United States District Court for the Northern District of California alleging violations of the Fair Labor Standards Act. E&Y moved to compel arbitration and was granted such relief by the District Court, which dismissed the class action. On appeal, a divided U.S. Court of Appeals for the Ninth Circuit reversed, holding that the concerted action waiver in E&Y’s employment agreements violated Sections 7 and 8 of the National Labor Relations Act – specifically, the National Labor Relations Board’s interpretation that such waivers violate that Act. Moreover, because the Ninth Circuit concluded that an employee’s right to act collectively was substantive, rather than procedural, the court further held that the Board’s ban on class action waivers did not conflict with the Federal Arbitration Act, finding that when an arbitration provision effectively waives a substantive federal right, the so-called “savings clause” of the Federal Arbitration precludes enforcement of that waiver.

Our prior blog posts discussed the developing split among federal circuit courts on this issue. For example, in Cellular Sales of Missouri, LLC v. National Labor Relations Board, No. 15-1620 (8th Cir. June 2, 2016), the Eighth Circuit held that arbitration provisions in employment agreements waiving class actions are enforceable. (See also Fifth Circuit, enforcing such provisions; (same). By contrast, in Lewis v. Epic Systems Corp., No. 15-2997 (7th Cir. May 26, 2016), the Seventh Circuit reached a similar result as the Ninth Circuit. This emerging split, coupled with the use of these types of provisions in employment agreements, may result in the United States Supreme Court ultimately deciding to address the issue. Morris v. Ernst & Young, LLP, No. 13-16599 (9th Cir. Aug. 22, 2016).

The Fifth Circuit refused to enforce an order of the NLRB that found an arbitration agreement was invalid because it waived an employee’s right to maintain employment related class or collective actions. In a short two-page ruling, the court held that the order of the NLRB was not in line with its D.R. Horton and Murphy Oil decisions, and granted review of the NLRB order. Citi Trends, Inc. v. NLRB, Case No. 15-60913 (5th Cir. Aug. 10, 2016).

This post written by Barry Weissman.

See our disclaimer.

This case involves a putative class action filed in federal court in New York in 2015 by Spencer Meyer against Travis Kalanick, the founder of Uber Technologies, Inc., alleging that Kalanick “orchestrated and participated in an antitrust conspiracy arising from the algorithm that [Uber] uses to set prices.” Kalanick did not move to compel arbitration at the outset based on Uber’s arbitration clause, but instead filed a motion to dismiss, which was denied, as well as a motion to reconsider the court’s determination that plaintiff could seek to proceed via class action, which was also denied. Uber then moved successfully to intervene, and moved to compel arbitration, to which Kalanick joined.

The New York federal court denied the motion to compel arbitration, finding that during Uber’s registration/contract formation process, the parties had not actually formed an enforceable agreement, and thus the plaintiff did not agree to arbitrate his claims.

Uber’s contracting process at the time required a potential Uber rider to input contact information and their payment details, and then “register” to form an account. There was text under the “register” button which said “[b]y creating an Uber account, you agree to the Terms of Service and Privacy Policy.” Although the “Terms of Service,” which contained the arbitration clause, and the “Privacy Policy” were hyperlinked, a user could register without clicking the links. Plaintiff said he did not recall the hyperlink or clicking it, which Uber did not contest. Thus, the court found that there was no basis for a claim that plaintiff had “actual knowledge of the agreement.”

In its analysis, the court looked at different types of electronic contract formation. First, it noted that there were “clickwrap” or “click-through” agreements, in which website users are required to click on an “I agree” box after presented with a list of terms and conditions of use. Next, it looked at “browsewrap” agreements, in which a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen, but a user can continue to use the website or services without visiting the page hosting the agreement or even knowing it exists. The court noted that Uber’s agreement was not a clickwrap agreement, which the court stated were “more readily enforceable,” but was more akin to a browsewrap agreement as an Uber user could access Uber’s services without clicking the hyperlink to the page hosting the agreement or even knowing that such an agreement exists. The court also noted that the Uber agreement could be a “sign-in wrap agreement” since a user was allegedly notified of the existence of the “terms of use” when signing in. Ultimately the court noted that these contract formation labels “can take courts only so far” and the issue of whether plaintiff agreed to arbitrate his claims “turns more on customary and established principles of contract law than on newly-minted terms of classification,” and is a fact-specific inquiry. The court, noting that the key question is the conspicuousness of the terms, found that Uber’s account creation process did not provide plaintiff with “reasonably conspicuous notice” of Uber’s User Agreement, including the arbitration clause, or evince “unambiguous manifestation of assent to those terms.” Thus, in light of the facts, the court found that plaintiff did not form an agreement to arbitrate, and denied the motion to compel arbitration.

Meyer v. Kalanick, No. 15 Civ. 9796 (USDC S.D.N.Y. July 29, 2016).

This post written by Jeanne Kohler.

See our disclaimer.