Second Circuit Strikes Class Action Waiver Provision
In a case that will have a profound effect on the enforceability of agreements containing class action waivers, the United States Court of Appeals for the Second Circuit recently held in In re American Express Merchants' Litigation that, depending upon the circumstances, an agreement prohibiting merchants from filing a class action for claims under federal antitrust law would grant a defendant "de facto immunity from antitrust liability by removing plaintiffs' only reasonably feasible means of recovery." The United States Court of Appeals for the Second Circuit is the federal appellate court for New York, Vermont and Connecticut.
Although the case did not involve an employment law claim, such as one seeking overtime or minimum wage compensation by employees, the court's reasoning applies equally to class actions seeking such amounts. Many employers require their employees to sign agreements stating that disputes or claims can only be brought on an individual, and not class, basis. Such provisions are intended, in effect, to prevent employees from effectively seeking redress for overtime and minimum wage violations, because individual claims for such amounts rarely justify the expense in pursuing an employer for payment.
The Second Circuit recognized in In re: American Express Merchants' Litigation that the cost of pursuing litigation for an individual merchant would be prohibitive. A class action waiver in the merchants' agreements would have effectively entitled American Express to avoid liability entirely, thus granting it "de facto immunity" from suit. We believe that the decision will be relied upon successfully by employees seeking to challenge class action waivers in their agreement in connection with lawsuits asserting their rights to overtime pay, minimum wage violations, and compensation due them under federal and New York law.
