Tips to Help Avoid Class Action Litigation


Taking advantage of recent case law developments can assist financial institution employers in avoiding and/or minimizing their exposure to class and collective action litigation. For example, courts have become increasingly inclined to enforce employment-related arbitration agreements that waive the employee’s ability to pursue his or her claims on a class or collective action basis. Further, the U.S. Supreme Court has allowed for the possibility that an offer of judgment to an individual claimant in a Fair Labor Standards Act (FLSA) collective action case may moot not only that individual’s claim, but also the claims brought on behalf of the putative collective action members. Developing case law is establishing whether and how this ruling can be applied in the Rule 23 class action context. Financial institutions should consider these increasingly available strategies to help reduce the risk of becoming embroiled in class or collective action litigation.

Class Action Waivers -

In a significant victory for employers, the Fifth Circuit Court of Appeals recently affirmed its decision in D.R. Horton v. NLRB, where the court considered a prior decision by the National Labor Relations Board (the NLRB). That controversial NLRB decision had held that it was an unfair labor practice for the employer to require its employees to sign mandatory arbitration agreements in the context of their employment agreement, wherein the employees were required to waive their ability to pursue legal claims on a class or collective action basis. In a favorable ruling for employers, the Fifth Circuit’s decision rejected the NLRB’s holding. The court relied on the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, wherein the Supreme Court struck down a California rule banning class action waivers in consumer arbitration contracts. The Fifth Circuit’s decision in D.R. Horton affirmatively expanded the Concepcion court’s analysis to the employment agreement arena, and now courts are increasingly finding that employers are permitted to include class and collective action waivers in arbitration agreements with their employees. Without question, this is a tool that financial institution employers should consider using in efforts to avoid expensive class and collective action litigation.

Originally published in Washington Bankers Association’s (WBA) Issues and Answers magazine on June 11, 2014.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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