and sizes updated their employee onboarding materials and employment agreements torequire that any disputes be resolved in arbitration on an individual basis. To date,companies have enjoyed a high rate of success enforcing those agreements and usingthem to thwart wage & hour class and collective actions out of the gate. In recent years,the Supreme Court’s decisions generally expanded the arbitration defense, and thusmade it more difficult for the plaintiffs’ bar to pursue wage & hour claims on a class-wideor collective action basis.After expanding this defense for defendants over the past decade, for the first year wecan recall, the Supreme Court issued two decisions that arguably pull back on andweaken the defense for defendants.In Southwest Airlines Co. v. Saxon, et al., 142 S.Ct. 1783 (2022), the Supreme Courtnarrowed the application of the Federal Arbitration Act by expanding its so-called“transportation worker exemption.” The Supreme Court held that “any class of workersdirectly involved in transporting goods across state or international borders” falls within§ 1 of the FAA, which exempts certain workers from the Act’s coverage. Id. at 1789. Asa result of the Supreme Court’s decision, the courthouse doors are open to moreplaintiffs since contracts with workers who engage in the process of transportationacross state lines are not enforceable under the FAA. Thus, employers will need to turnto state law to attempt to enforce those agreements, and the arbitration provisionscontained therein.The U.S. Supreme Court also broadened the circumstances that may give rise to adefendant’s waiver of the arbitration defense in Morgan, et al. v. Sundance, Inc.,142 S.Ct. 1708 (2022). There, the employer defendant failed to raise the arbitrationprovision as an affirmative defense and litigated for eight months before attempting tocompel arbitration under the FAA. Id. at 1711. The Supreme Court reversed thedecisions of the district court and U.S. Court of Appeals for the Eighth Circuit, whichheld that although a showing of prejudice is not a feature of federal waiver lawgenerally, the requirement should apply to waiver of the right to arbitration because ofthe “federal policy favoring arbitration.” Id. at 1712. Instead, the Supreme Courtconcluded that a court must hold a party to its arbitration contract just like any othercontract but may not devise novel rules to favor arbitration over litigation. Id. at 1713.As a result of the Supreme Court’s decisions in 2022, chinks in the armor of thearbitration agreement defense have begun to grow. Given the impact of the arbitrationdefense, in 2023, companies may face additional hurdles on the judicial front as theplaintiffs’ bar continues to look for workarounds.C.The Growing Prevalence Of Personal Jurisdiction DefensesJust like arbitration, corporate defendants in 2022 vigorously asserted defenses basedon a lack of personal jurisdiction to eliminate or curtail wage & hour class actions, andcollective actions in particular. In the case of Bristol-Myers Squibb Co. v. Superior Courtof California, San Francisco County, 137 S. Ct. 1773 (2017), the U.S. Supreme Courtruled that every plaintiff in a mass action needs to establish grounds for the court toDM39529965.116© Duane Morris LLP 2023Wage & Hour Class And Collective Action Review – 2023
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