Rebecca S. Bjork – Page 2 – Class Action Defense

January 18, 2023 by Rebecca S. Bjork

When Contract Interpretation Principles Matter: Court Provides A Roadmap For Avoiding Ambiguous And Contradictory Interpretations Of Arbitration Clauses

By Eden E. Anderson and Rebecca Bjork

Duane Morris Takeaway: It is a truism that arbitration is a matter of consent, and consent is embodied in contract law principles. In a recent ruling entitled Querette v. Chromalloy Gas Turbine, LLC, Judge Philp Halpern of the U.S. District Court for the Southern District of New York brought those abstract principles into the light of day while forging an interpretation of a collective bargaining agreement containing an arbitration clause and harmonizing seemingly contradictory clauses. In finding in favor of a defendant seeking to arbitrate a dispute with its employees, the Court provided a roadmap of sort that is well worth a read for corporate counsel.

Introduction

Requiring arbitration of workplace disputes unquestionably has become one of the most important legal tools for employers over the past several years. This is in large part due to developments in the law that encourage courts to enforce arbitration clauses that waive the right of employees to bring class actions. Because class action lawsuits are inevitably costly to defend and can out stretch over several years, employers – especially those with large headcounts – have come to rely on arbitration agreements containing class waivers to rein in litigation expenses.

For this reason, the careful drafting of arbitration agreements is very important. Agreements must be drafted in a way that avoids ambiguity and conflicting clauses. If an agreement is ambiguous, a court is more likely to construe it against the drafter, which often means denying motions to compel arbitration and allowing class claims to proceed in court. And if an agreement contains conflicting or contradictory clauses it is easier for a party to argue that it cannot be enforced. In such a case, the court must work to try and harmonize the conflicting clauses. Contract law assumes each clause was included for a reason, so courts attempt to avoid interpretations that would render a clause meaningless.

The Ruling In Querette v. Chromalloy Gas Turbine, LLC

These basic principles of contract interpretation played out in interesting ways in a recent case decided by District Court Judge Philip M. Halpern of the Southern District of New York. In Querette v. Chromalloy Gas Turbine, LLC, No. 22 Civ. 00356 (S.D.N.Y. Jan. 10, 2023), the Court was asked to compel arbitration of a class action filed under New York Labor Law §191(1)(a) that requires employers to pay their employees on a weekly basis. Relying on contract law principles, the Court sided with the defendant and ordered the plaintiff’s claim to be arbitrated.

The agreement at issue was the product of collective bargaining. Article 14 of the collective bargaining agreement (“CBA”) sets forth a multi-step grievance procedure that members of the union who have a dispute with the employer must follow. That process culminates in arbitration before the American Arbitration Association (“AAA”) to resolve the dispute. Id. at 2.

Section 14.F. of the CBA states that “Any and all grievances and all issues arising from and relating thereto, including the interpretation and application of this section shall be governed by, construed in accordance with and processed pursuant to AAA’s then existing rules governing labor disputes, which rules are fully incorporated herein.” Id. Section 14.G. of the CBA then provides that the grievance process is the sole mechanism for resolving disputes between employees and the employer, with two exceptions. That section states, in relevant part, “Except for resort to the agencies and/or courts charged with the enforcement of the laws enumerated in Article I herein, and except with further resort to the National Labor Relations Board, it is the intention of the parties that employees will look exclusively to this Agreement for the resolution of all disputes under this Agreement.” Id. at 2-3. Article I identifies several federal and state discrimination and family leave laws, but does not include state or federal wage and hour laws.

Section 14.I contains the second carve-out, ensuring a “Right of Representation and/or Counsel for Parties Only,” which preserves the right of union members to be “individually represented by private counsel as to any alleged right, only that any such alleged right must be pursued in a forum other than under this Article.” Id. at 3. In other words, Section 14.I appears on its face to carve out from the arbitration requirement any case brought by an employee who has retained private counsel. Reading the clause that way contradicts the mandate that all disputes between an employee and the employer must be subject to the grievance process spelled out in the CBA.

The plaintiffs contended that Section 14.I applied to their claim because they had retained private counsel to pursue their class action wage claim, so it could not be compelled to arbitration under the express and unequivocal language in that clause. The Court did not agree, and reached its conclusion by way of the very basic principles of contract interpretation explained above; reading a contract in a way that avoids ambiguity and conflicting clauses.

Basis Of The Court’s Opinion

First, the Court was required to determine whether it or an AAA arbitrator had the authority to determine if the dispute was arbitrable in the first place. The AAA rules provide that arbitrability is for an arbitrator to decide. However, the Court noted correctly that the U.S. Supreme Court has held that courts must not assume that the parties agreed to assign arbitrability to an arbitrator unless there is “clear and unmistakable evidence” of the parties’ intent to delegate that issue to an arbitrator. The court applied Second Circuit case law precedent holding that incorporation of the AAA rules alone does not per se show an intent to delegate arbitrability; rather “context matters.” Id. at 6. The context that mattered to Judge Halpern was the fact that the CBA was not so broad as to claim to cover each and every dispute between an employee and the defendant. He reasoned that the carve out for discrimination and family leave claims, along with the private counsel carve out itself, created ambiguity as to the parties’ intent to delegate arbitrability decisions to an arbitrator. And ambiguity means there is not clear and unmistakable evidence of the intent to delegate. Thus, the Court concluded it must decide arbitrability.

Second, the Court found that the private counsel carve-out did not exempt the plaintiff’s claims from the CBA’s arbitration requirement. Id. at 8. Applying the rule that contract interpretation must not render clauses contradictory to one another, the Court read the agreement in a way that gave meaning to both the requirement to arbitrate disputes and the private counsel carve out. The Judge opined that if the plaintiffs could hire private counsel as a way to evade the CBA’s arbitration requirement in every type of case, not just the discrimination and family leave act claims enumerated in Article I of the CBA, that would render the grievance procedure culminating in arbitration meaningless.

Because the CBA was the product of extensive and careful negotiation, the Court concluded that could not be the intent of the parties. Limiting the private counsel carve out to only discrimination and family leave cases allowed both clauses to have meaning. Id. at 8-9. In this way, the Court harmonized seemingly contradictory clauses in the CBA, and ordered the plaintiff’s wage law claim to arbitration.

Implications For Employers

It is not clear from the decision whether the arbitration itself can proceed on a class-wide basis, as there is no discussion of whether any class waiver exists in the CBA. Nonetheless, the Court’s order represents a master class in how to properly apply contract interpretation principles and enforce all clauses in arbitration agreements.

November 7, 2022 by Gerald L. Maatman, Jr.

What Employers Should Know About The EEOC’s Draft Strategic Plan For FY 2022-2026

By Gerald L. Maatman, Jr., Jennifer A. Riley, Rebecca S. Bjork, and Gregory Tsonis

Duane Morris Takeaways: On November 4, 2022, the U.S. Equal Employment Opportunity Commission released a preliminary draft of its 2022-2026 Strategic Plan. According to its preliminary draft, the EEOC plans to focus its internal operations over the next four years to make changes that it hopes will improve its performance securing targeted injunctive relief and conducting systemic investigations, along with its use of technology to process charges and conciliate them. The four-year plan – which is distinct from the EEOC’s strategic enforcement plan, still to be released in the coming months – was published in the Federal Register and is open for comment until December 4, 2022. Even if employers do not submit comments, they would be well-advised to review the draft and final Plan once it is announced because it provides a window into the EEOC Commissioners’ thinking for how the agency will use its resources to redress and deter workplace discrimination.

Introduction

Every four years, the EEOC prepares a Strategic Plan that drives how it will improve its internal operations to better enforce federal anti-discrimination laws. The Plan for 2022-2026 that has now been published in the Federal Register is important because once it is finalized after the review and comment period expires, it will set forth specific goals along with performance metrics to measure how well those goals are being met. The key elements of the draft Plan and why they are important are critical data points for employers.

Operational Improvements And Performance Metrics Sought By The EEOC

The 2022-2026 Strategic Plan draft signals that when investigating private sector employers, the EEOC will focus its internal operations on four key areas. First, the EEOC will ensure that by FY 2025, “90% of EEOC conciliations and litigation resolutions contain targeted, equitable relief and that level is maintained through FY 2026.” (Draft Strategic Plan at 15.) The draft Plan explains the EEOC’s view that such a goal likely would improve compliance with the statutes enforced by the agency nationwide.

Second, between FY 2022 and 2026, the EEOC aims to continue to “favorably resolve at least 90% of enforcement lawsuits.” (Id. at 16.) On this point, the EEOC explains that because its systemic litigation program is resource intensive, this goal is important to enable the agency to use its resources in a wise and efficient manner. Employers who have faced systemic lawsuits are well-aware of the amount of litigation resources they can consume, both for the companies involved and the EEOC.

Third, “In each year through FY 2026, the EEOC will provide training to all field staff on identifying and investigating systemic discrimination, and at least 90% of investigators and trial attorneys will participate in systemic training each year.” (Id.) The draft Plan explains that the purpose of this goal is “expanding the EEOC’s capacity to conduct systemic investigations, resulting in a coordinated, strategic, and effective approach to systemic enforcement.” (Id.) This likely signals that the draft Strategic Enforcement Plan will continue to emphasize and prioritize the EEOC’s use of pattern or practice lawsuits to enforce the statutes over which Congress gave it authority.

Fourth, “the EEOC will make significant progress toward enhanced monitoring of conciliation agreements, leading to a more robust compliance program.” (Id. at 17.) The Commission’s focus here is to implement “streamlined and standardized procedures, improved tracking and internal reporting mechanisms, and related training for EEOC field staff” to ensure that conciliation agreements are reached and enforced. (Id.).

Finally, the EEOC continues to be aware that its charge intake process needs work. The draft Plan pledges to leverage technological advancements to “enhance its intake services to potential charging parties, respondents, and representatives.” (Id. at 19.)

Implications For Employers

The EEOC’s FY 2022-2026 draft Strategic Plan is a document that provides insight into the direction the agency will take to improve how it functions.

With a nod the old E.F. Hutton TV commercial, “when the EEOC speaks, employers should listen…”

October 11, 2022October 17, 2022 by Class Action Defense

California Dreaming For Employers: U.S. Supreme Court Orders California State Court of Appeal To Reconsider Denial Of Arbitration In PAGA Case

By: Gerald L. Maatman, Jr., Jennifer A. Riley, and Rebecca S. Bjork

Duane Morris Takeaways: On October 3, 2022, the Supreme Court of the United States granted certiorari, reversed, and remanded a case seeking review of a motion to compel arbitration in a California Private Attorney General Act (“PAGA”) labor law case entitled Dolgen California, LLC v. Galarsa, No. 21-1444 (U.S. Order List, Oct. 3, 2022). Granting Dollar General’s specific request, the Supreme Court ordered the California Court of Appeal to reconsider its decision affirming a trial court’s denial of the company’s motion to compel arbitration. That court held that the waiver of representative actions in the plaintiff’s arbitration agreement was unenforceable under California law. This is only one of several cases pending in California courts involving arbitration agreements that waive an employee’s right to bring a representative action under the PAGA that are being revisited in light of the U.S. Supreme Court’s ruling in Viking River Cruises, Inc. v Moriana (No. 20-1573, June 15, 2022). As a result, employers will soon have a better understanding of how PAGA representative action waivers will be interpreted in California within the now-controlling framework of the Federal Arbitration Act.

The Holding In Viking River Cruises, Inc. v. Moriana

Earlier this year, on June 15, 2022, the U.S. Supreme Court issued its long-awaited ruling in Viking River Cruises, Inc. v. Moriana. Companies with California-based workforces watched the case closely because it represented an opportunity to clarify the extent to which a court-made rule established by the California Supreme Court back in 2014 could co-exist with the Federal Arbitration Act (“FAA”). The FAA has long been found to favor the enforcement of arbitration agreements, including waivers of class and other representative claims. But the California Supreme Court’s decision made it impossible for class waivers to be enforceable under state law as a result of its decision in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 387-88 (2014) (holding that a “PAGA claim lies outside the [FAA]’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship,” but is instead “a dispute between an employer and the state”).

In a complex and lengthy opinion, the Supreme Court held in Viking River that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Slip Op. at 20.) “This prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate,’ and does so in a way that violates the fundamental principle that ‘arbitration is a matter of consent[.]’” (Id. at 18 (citations omitted).) In short, representative PAGA claims can now be subject to waiver in an arbitration agreement because “state law cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.” (Id.)

Dollar General’s Petition For Certiorari

Dollar General filed a petition for certiorari while Viking River was pending, expressly asking the Supreme Court to hold the petition pending a decision in that case. It requested that once Viking River was decided, the Supreme Court should at that time grant Dollar General’s petition, vacate the California Court of Appeal decision below, and remand the case to that court for reconsideration in light of Viking River (known to Supreme Court practitioners as a “GVR” order). The facts in the Dollar General case are strikingly similar to those at issue in Viking River, and the company’s petition described the question presented as “Does the FAA require enforcement of a bilateral arbitration agreement providing that an employee cannot assert representative claims, including under PAGA?”

The U.S. Supreme Court’s GVR Order

On October 3, 2022, the Supreme Court did what Dollar General expressly asked it to do. (See Order List, Oct. 3, 2022.)

As is typical with GVR orders, there is no explanation of the reasoning behind the order, except that the California Court of Appeal is instructed to apply the reasoning of Viking River on remand. The California Court of Appeal now will soon reconsider its affirmation of the trial court’s denial of Dollar General’s motion to compel the plaintiff’s claim to an individual, non-representative arbitration proceeding.

Implications For Employers

Employers have long known that if they have operations in California, special attention must be paid to state law provisions that impose restrictions on employment practices unlike those in any other state. Now that the U.S. Supreme Court has ruled that the FAA preempts the court-made rule of Iskanian that precluded splitting representative PAGA claims from individual claims, it is likely that California courts will modify their enforcement of representative action waivers in arbitration agreements. But because this is California, wary employers would be wise to stay tuned for further developments in this rapidly changing area of the law.

October 10, 2022October 17, 2022 by Class Action Defense

Don’t Mess With Texas: Federal Judge Rules That The EEOC’s Guidance On LGBTQ Employees And Bostock Is Invalid

By: Gerald L. Maatman, Jr., Jennifer A. Riley, and Rebecca S. Bjork

Duane Morris Takeaways: On October 1, 2022, in Texas v. EEOC, No. 21-CV-194 (N.D. Tex. Oct. 1, 2022), Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas ruled that the EEOC’s guidance on Bostock v. Clayton County, Georgia, 140 S.Ct. 1731 (2021), was invalid and unlawful. The EEOC’s guidance sought to delineate workplace protections for LGBTQ employees relative to general workplace policies, including obligations related to dress codes, use of bathrooms, and preferred pronouns. The Court agreed with the legal challenge mounted by the State of Texas over the Commission’s guidance. While the final chapter on these issues is far from written, employers should consider the ruling in Texas v. EEOC as part of a broader analysis of EEOC workplace regulations and the ever expanding array of issues involving appropriate workplace personnel policies.

The EEOC’s Guidance

On June 15, 2021, the Commission issued guidance on its interpretation of Bostock on the one-year anniversary of the U.S. Supreme Court’s ruling. Bostock, in a 6 to 3 decision, held that Title VII of the Civil Rights Act of 1964 prohibits discrimination against employees based on their sexual orientation or gender identity.

The EEOC’s guidance on Bostock – which can be accessed here – asserted that employers were obligated to accommodate LGBTQ employees regarding dress codes, use of identifying pronouns, and bathrooms and locker rooms. Critics of the Commission claimed that the guidance went far beyond the holding in Bostock and constituted impermissible rulemaking.

The Legal Challenge Of Texas

In what only can be deemed an extraordinary legal challenge, the Texas Attorney General sued the EEOC and sought declaratory and injunctive relief to invalidate the EEOC’s guidance and enjoin its enforcement and implementation. The lawsuit also challenged an analogous set of regulations issued by the U.S. Department of Health and Human Services (“HHS”). After rulings on procedural issues, Texas brought a motion for summary judgment on the grounds that: (i) the guidance of both agencies was inconsistent with the law; (ii) was arbitrary and capricious; and (iii) constituted improper rulemaking without following applicable notice-and-comment rulemaking procedures under the Administrative Procedure Act (“APA”).

The Court’s Decision

Judge Kacsmarky agreed with Texas, rejected the positions of the EEOC and the HHS, and granted summary judgment against the agencies.

The key aspect of the decision focused on the reach of Bostock. Judge Kacsmarky opined that the U.S. Supreme Court confined its ruling to a holding that Title VII banned workplace bias due to an employee’s “homosexual or transgender status.” Id. at 6. In analyzing Bostock, Judge Kacsmarky determined that the EEOC and the HHS misread the Supreme Court’s opinion. Id. at 7-14. He held that Bostock did not extend to “correlated conduct,” such as dress, bathrooms, use of pronouns, or healthcare practices. Id. at 4.

Based on this reasoning, Judge Kacsmarky ruled that the EEOC and HHS violated Title VII and the APA by issuing what he deemed the equivalent of substantive, legislative rules through improper procedures. As a remedy, he declared the guidance unlawful, set it aside, and awarded attorneys’ fees and costs to Texas.

Implications For Employers

The ruling in Texas v. EEOC reflects a judicial finding that the Commission acted inappropriately in attempting to push the legal envelope in terms of how Bostock should be read to obligate employers to accommodate LGBTQ employees in the workplace. That said, the ruling is unlikely to shut down the Commission’s efforts to push for expansive interpretations of the boundaries of Title VII. Employers can expect the Commission to pursue other test cases and litigate over the interpretation of Bostock for the foreseeable future. Furthermore, the Commission is apt to appeal the ruling in Texas v. EEOC to the U.S. Court of Appeal for the Fifth Circuit. Stay tuned!