Former Twitter Employees Forced to Arbitrate WARN Act Claims
Several former Twitter employees lost their bid for a class action against the social media giant based on alleged violations of the Worker Adjustment and Retraining Notification Act (WARN Act). The laid-off plaintiffs will be sent to private arbitration to adjudicate their claims on an individual basis.
The lawsuit alleges that Twitter conducted mass layoffs without giving proper advanced notice, in violation of the California and federal WARN Acts. A similar case was brought against Tesla a few months earlier, a symptom of the industry-wide reductions in force felt by tech workers. Like the Tesla plaintiffs, a number of the named former Twitter employees were recently told to pursue their claims via arbitration, rather than via the intended class action.
The court found that the named plaintiffs signed binding arbitration agreements as part of their employment contracts with Twitter. The agreements were technically not “mandatory” as a condition of employment, but the named plaintiffs did not choose to opt-out. The agreements included language now standard in consumer and employment contracts, requiring any issue between the parties to be resolved by arbitration and containing a “class action waiver” which requires the parties “to bring any dispute in arbitration on an individual basis only, and not on a class, collective, or private attorney general representative action basis.”
The ruling relied heavily on the Federal Arbitration Act (FAA). The FAA was enacted to foster the use of arbitration agreements instead of court proceedings. Federal courts will send a case to arbitration after determining whether “a valid arbitration agreement exists and, if so, whether the agreement encompasses the dispute at issue.”
The Twitter and Tesla cases are emblematic of the conflict between the push for more arbitration to relieve the burden of the courts and the need for class actions to address matters difficult to resolve on an individual basis. Arbitration works best between two parties of equal power--two individuals or two businesses. The parties can resolve their dispute more efficiently in private arbitration than through a formal court proceeding.
Binding arbitration has, however, become more and more of a weapon aimed at consumer class actions. Individuals whose claims have a relatively minor dollar value lack the resources or the motivation to pursue a full arbitration. Who is willing to spend the time and money to arbitrate a case against a multinational corporation in the hopes of winning $10 or $100? The purpose of the class action procedure is to allow people to band together with other similarly-harmed individuals to bring a case worthy of pursuing.
For a time, courts were willing to override arbitration agreements considered “unconscionable.” When the balance of power between the parties was extreme and the individual amounts in controversy were very low--such as if a service provider secretly overcharged a million customers a few dollars each--the agreement was considered unconscionable. The U.S. Supreme Court found that such judgments by the courts--including a California Supreme Court ruling--ran contrary to the purpose of the FAA.
These days, however, so long as an arbitration agreement is facially valid and the individual plaintiff checked the box to “accept,” class actions are out and arbitration is in. Such is the case with Twitter. The arbitration clauses even “state quite clearly that disputes about the enforceability and validity of the arbitration agreement” are to be addressed by the arbitrator, not by the court. Based on the contractual language, the court lacks the power to rule on whether the arbitration agreements were valid in the first place.
The lawsuit against Twitter may, however, yet survive. A few additional named plaintiffs were recently added to the case, and they claim to have opted out of the binding arbitration clause. If they were not subject to the arbitration agreement, Twitter will need to find other grounds to challenge their claims.
