In a recently released decision, the Washington Court of Appeals declared class action waivers unenforceable in certain employment contracts.
In Oakley v Domino’s Pizza, LLC, Plaintiff Oakley filed claims under the Washington Minimum Wage Act (WMWA) and Wage Reimbursement Act. Oakley was a delivery driver for Domino’s Supply Chain (not a pizza delivery driver), where Oakley delivered raw materials to franchise stores, and some routes required him to cross state lines. When he started working for Domino’s, he signed an agreement to arbitrate his claims under the Federal Arbitration Act (FAA) and also waived his right to participate in class action lawsuits. Despite this, he filed a class action lawsuit asserting wage and hour claims on his own behalf and on behalf of a class of drivers.
Two primary legal issues determined whether Domino’s request to force the claim into arbitration would succeed: (1) whether the agreement was governed by state law or federal law; and (2) whether state law applied, whether the class action waiver was enforceable.
With respect to the first issue, the Court found that the Federal Arbitration Act (FAA), which specifically exempts “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce » doesn’t apply to this contract, because of the exemption. The Court first recognized that “a narrow interpretation [of the exemption] is appropriate”, but then relied on 9e Previous circuit even finding local drivers were “engaged” in interstate commerce if the goods they transported were part of the interstate commerce chain. The fact that Oakley itself drove goods across state lines quite frequently led the Court to declare this contract exempt from the FAA.
The Court then considered the class action waiver contained in the contract under Washington contract law, finding it inadmissible and therefore unenforceable. To find a contrary public policy necessary to establish the unfairness of the class action waiver, the Court considered state laws protecting concerted activity and collective bargaining. The Court effectively equated class action litigation with collective bargaining, concluding that “class actions support the same public policy.”
A surprising factor in the Court’s analysis was that class actions are more cost-effective for plaintiffs’ attorneys. Oakley’s attorney asserted, and the Court deemed it important, that the attorney would have been less inclined to take this case on an individual basis because it was a small claim and not lucrative enough for the attorney. . No mention was made that claims under the WMWA and Wage Reimbursement Act to understand the recovery of reasonable attorneys’ fees, making even small claims financially viable for attorneys. Instead, the Court found that Oakley could not afford to hire an attorney, ignoring that such claims are almost always litigated on a contingent basis.
First, until the U.S. Supreme Court further clarifies what a “narrow” view of the FAA’s “interstate commerce” exemption really means, any worker whose job includes transporting anything who has been out of state (e.g., an Amazon “last mile” driver) might not be covered by the FAA. Federal circuit courts are currently split on the level of interstate transportation needed to trigger the exemption.
Second, if even employees arguably are engaged in transportation, employers in Washington should place less reliance on class action waivers, especially when those waivers affect rights protected by law. Of course, the existence and enforceability of such waivers is perhaps the first and most important issue to be determined in a class action. When class action waivers are binding, quick settlements usually follow. However, if a Washington court finds that a class action waiver conflicts with the litigant’s potential scope or the availability of recovery, the objective of the class action waiver – at least one division of the courts in Washington may find such clauses objectionable. Plaintiff’s attorneys now have another way to attack these waivers: they’ll make less money (which, until now, was simply implied).
A final reminder:
Even if the FAA otherwise applies, due to recent changes to that law, an employee cannot be required to arbitrate or waive class actions for sexual harassment or sexual assault.