Many employers believe that it’s better to resolve employment claims in arbitration rather than going to court. If you determine that arbitration is the best course, it’s common to include a class or collective action waiver to avoid many of the procedural headaches associated with defending a class arbitration. However, be aware that you could be setting yourself up for serial arbitration claims, where savvy plaintiffs’ counsel can file dozens, hundreds, or even thousands of individual arbitration claims – and this can be just as or more expensive than the class action your waiver sought to avoid.
For example, in a 2020 case, the applicable arbitration rules required individual claimants to pay $300 each in filing fees and employers to pay $1900. Five thousand individual workers moved to compel arbitration. The judge ultimately granted their motion and required the employer to pay more than $9 million in arbitration filing fees. (See Abernathy v. DoorDash, Inc., 438 F. Supp. 3d 1062, 1065-66 (N.D. Cal. 2020)). Note, the $9 million in filing fees was in addition to any award the employer may have been ordered to pay if the employees won their arbitrations.
To avoid finding yourself in a similar situation, careful drafting is a must. Consider choosing an arbitral forum that has specific procedures that address mass arbitrations. These forums often streamline the administration and decrease the cost of large volume filings involving the same or related parties in employment cases. Depending on the forum you choose, specific language must be invoked in the arbitration agreement in order to take advantage of these procedures. If you fail to include these important provisions, you could find yourself facing the clone army pictured above, and it will be cold comfort that the battlefield is an arbitration proceeding rather than a courtroom.
One final note: given the potential for worker misclassification issues and that such misclassification can trigger costly collective action wage and hour complaints, employers should consider whether their independent contractor agreements, as well as their employment agreements, could benefit from another look.