New York Appellate Division, First Department, Holds That Class and Collective Action Waivers Are Unenforceable Under the National Labor Relations Act, Differing with the Second Circuit.

In Gold v. New York Life Insurance Co., New York state court endorses reasoning of the Seventh Circuit decision currently on review by the Supreme Court in Epic Systems Corp. v. Lewis, No. 16-285. July 18, 2017
In an issue of first impression for New York State courts, the First Department held that “arbitration provisions..., which prohibit class, collective, or representative claims, violate the National Labor Relations Act (NLRA) and thus, that those provisions are unenforceable.” Gold v. New York Life Insurance Co., Case No. 653923/12, 2017 N.Y. Slip Op. 05695 (July 18, 2017).

The First Department acknowledged that there is a federal circuit split on this question, that the Second Circuit has ruled differently and that the United States Supreme Court has granted certiorari to decide the issue. The First Department stated that, “in all likelihood, the United States Supreme Court will resolve this circuit split in due course.” In the meantime, it endorsed the Seventh Circuit’s reasoning that a required waiver of collective claims in employment agreements violates the NLRA, and thus is void and invalid under the Federal Arbitration Act’s saving clause. Previous blog posts on this topic include our June 20 post, U.S. Department of Justice Changes Its Position Before the Supreme Court in Epic System Corp. v. Lewis; and our March 22 post, Employment Law 2016 Year in Review.

As a practice note, readers are reminded that arbitration agreements in interstate commerce are governed by the Federal Arbitration Act (“FAA”) but the FAA is not an independent basis for federal jurisdiction. If a New York-related dispute concerns a question of federal law or satisfies the requirements for federal diversity jurisdiction, then a state complaint could be removed to federal court and, as noted, the Second Circuit has held that arbitration agreements containing class waivers are enforceable. Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013); Patterson v. Raymours Furniture Co., 659 F. App’x 40 (2d Cir. 2016).   

Class and Collective Actions