2022 Was a Bad Year for Arbitration, a Key Employer Defense Against Class Actions

Author: Robert S. Teachout, Brightmine Legal Editor

January 25, 2023

Employers had a mixed bag when it came to class action lawsuits in 2022, according to a recent report. The Duane Morris Class Action Review - 2023 provides analysis of trends and significant rulings that can help inform decisions in dealing with complex risks associated with class action litigation.

Among the 10 trends covered in the report, two trends in particular show the impact of class action litigation and government action on the employment landscape:

  • US Supreme Court rulings and federal legislative action created setbacks and statutory impediments to the use of arbitration against class action lawsuits; and
  • A slight reduction in government enforcement actions, coupled with a large increase in settlement amounts.

Supreme Court, Congress Landed Blows on Arbitration

The report cites three Supreme Court rulings that will affect arbitration, "the most effective tool for combatting class actions," going forward. Counter to the trend of Court rulings in recent years that expanded the use of arbitration against class action lawsuits, these 2022 rulings instead narrowed application of the defense:

However, the Court also issued a ruling favorable to employers in Viking River Cruises, Inc. v. Moriana. It held that the FAA preempts California's Private Attorneys General Act (PAGA) and that employers are entitled to compel arbitration. Plaintiffs had used PAGA to attempt to circumvent workplace arbitration, such as regarding the division of individual and non-individual claims through arbitration agreements. This resulted in the first decrease since 2017 in the number of PAGA cases filed.

"Class action litigation entails ever-changing guideposts, new playbooks and innovation."

Gerald L. Maatman, Jr., Partner, Duane Morris LLP

In addition, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which significantly limits the availability of arbitration for cases that allege sexual harassment or sexual assault. The Act amended the FAA and provided plaintiffs the discretion to enforce pre-dispute arbitration provisions and class and collective action waivers in cases where they allege sexual harassment or sexual assault. In other words, while the Act does not render such agreements invalid, it allows the party bringing sexual assault or sexual harassment claims to elect to enforce them or avoid them. The Act does not impact agreements entered into after a dispute arises.

New Agency Litigation Slowed but Settlement Amounts Increased

The report notes that the Biden administration has made it a priority to expand the availability of employment law rights and remedies to employees. Much of that effort has focused on the issuance of proposed worker-friendly rules, particularly by the US Department of Labor (DOL), that could have a domino effect on workplace class actions. However, those efforts have been vigorously challenged in court. The result, according to the report, has been that litigation has taken a back seat.

For example, The Equal Employment Opportunity Commission (EEOC) filed 94 lawsuits in FY2022, an 18% decrease from the 114 cases filed last year. In addition, the EEOC reported that it filed 13 systemic lawsuits this past year, the same number as during fiscal year 2021. The top three reasons for EEOC charges were allegations on the basis of sex (16), race (13) and retaliation (12). By comparison, the agency has 29 pending systemic cases in its current docket.

Despite this reduced activity, the top 10 settlements in EEOC government enforcement lawsuits totaled $403.2 million in FY2022, more than double the top 10 total from FY2021 of $146.38 million. And settlements for the top 10 class action settlements totaled $1.31 billion, fueled largely by sexual abuse class actions against universities with more than $1 billion worth of settlements.

Other trends covered in the review include:

  • Massive class action settlements;
  • Plaintiff-friendly class certification conversion rates;
  • Expansive growth in privacy class action litigation; and
  • An expansion of data protection issues that continue to plague corporate defendants.

Because class action litigation presents one of the most significant risks to corporate defendants today, employers need to understand the trends and how to protect against them, according to attorney Gerald L. Maatman, Jr., a partner in the Duane Morris Chicago office and chair of its Workplace Class Action group.

"With the growth of class action litigation over the past decade, counsel for defendants and plaintiffs alike have become more sophisticated; the statutory authority and case law precedents have continued to evolve; and parties on both sides have expanded their arsenal of tools to pursue and to defend these cases," said Maatman. "As a result, class action litigation entails ever-changing guideposts, new playbooks and innovation."