A class action waiver is a provision found in some contracts which prohibits a party from filing a
class action
A class action, also known as a class-action lawsuit, class suit, or representative action, is a type of lawsuit where one of the parties is a group of people who are represented collectively by a member or members of that group. The class actio ...
legal proceeding against the other party, or both parties waiving the right to file class actions against each other. These clauses are most often found in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
and agreements with American citizens.
Class action waivers may be found on a standalone basis, though they are more commonly found as part of an
arbitration clause
An arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always bind ...
, and when paired with such clauses, frequently include jury trial waivers. All three clauses are the subject to controversy and wide legal debate, with supporters claiming the tools are strong risk management tools and the expense that class action litigation presents both in regard to time and money, though advocacy groups argue that these clauses reduce the rights of consumers and employees and prevent companies from being held accountable for grievances such as wage and hour violations. Class action waivers legality across countries and administrative decisions range in legality between jurisdictions, with some countries and provinces like
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...
and Canadian province of
Ontario
Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central C ...
banning such clauses, while the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
Supreme Court ruling in ''
Epic Systems Corp. v. Lewis
''Epic Systems Corp. v. Lewis'', 584 U.S. ___ (2018), was a case decided by the Supreme Court of the United States on how two federal laws, the National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA), relate to whether emplo ...
'' that such clauses are enforceable.
Contractual Language
The website Law Insider has listed various sample class action waiver clauses. Most, though include this wording or a variation of it:
"You and we agree that any dispute filed against each other must be on an individual basis and not as a class or collective action."
Legal Status by Country
Many countries have not tested a class action waiver in courts, though the international law firm
CMS
CMS may refer to:
Computing
* Call management system
* CMS-2 (programming language), used by the United States Navy
* Code Morphing Software, a technology used by Transmeta
* Collection management system for a museum collection
* Color manag ...
predicts that these clauses are unconscionable or unenforceable in Germany, Italy, Russia, and the United Kingdom.
Australia
Class action waivers remained untested in Australia until December 2021, where the
Federal Court of Australia found it was an unfair contract term. In ''Karpik v Carnival plc,'' the court found that
Australian Consumer Law
The Australian Consumer Laws (ACL), beinto the ''Competition and Consumer Act 2010'', is uniform legislation for consumer protection, applying as a law of the Commonwealth of Australia and is incorporated into the law of each of Australia's stat ...
in section 23 (which already bans
standard form contracts) prohibits class action waivers.
Canada
Class action waivers lack a uniform policy across Canada, as the
Supreme Court of Canada has found that provincial legislation governed disputes. Nationally, though, in ''Seidel v. TELUS Communications'', the court found that because a class action waiver was attached to an invalid arbitration agreement, the class action waiver was void.
On the provincial level,
Ontario
Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central C ...
, per the Consumer Protection Act of 2002, has banned class action waivers. A court of appeals in
British Columbia
British Columbia (commonly abbreviated as BC) is the westernmost province of Canada, situated between the Pacific Ocean and the Rocky Mountains. It has a diverse geography, with rugged landscapes that include rocky coastlines, sandy beaches, ...
also found that class action waivers were unenforceable and unconscionable in ''Pearce v. 4 Pillars Consulting Group'' due to the contract in question being a
standard form contract written by 4 Pillars and giving little bargaining power to Pearce.
France
Under Article L. 623-32 of the French Consumer Code, as well as Article L. 1143-21 of the French Public Health Code, France considers class action waivers "abusive" and illegal within the country.
India
Class action waivers have not been tested in Indian courts, though Order 1 Rule 8 of the
Code of Civil Procedure
Civil procedure is the body of law that sets out the rules and standards that courts follow when adjudicating civil lawsuits (as opposed to procedures in criminal law matters). These rules govern how a lawsuit or case may be commenced; what ki ...
allows for consumers, with court permission, to initiate class action lawsuits, which the Indian law firm Shardul Amarchand Mangaldas & Co notes can be problematic for class action waiver enforceability.
United States
The
Supreme Court of the United States has found on multiple occasions that class action waivers are legal. In ''
AT&T Mobility LLC v. Concepcion'', the high court ruled that class action waivers are legal under the
Federal Arbitration Act
The United States Arbitration Act (, codified at ), more commonly referred to as the Federal Arbitration Act or FAA, is an act of Congress that provides for judicial facilitation of private dispute resolution through arbitration. It applies in ...
as they significantly impact what the court saw as Congress's pro-arbitration stance on arbitration. The court reiterated its stance in ''
Epic Systems Corp. v. Lewis
''Epic Systems Corp. v. Lewis'', 584 U.S. ___ (2018), was a case decided by the Supreme Court of the United States on how two federal laws, the National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA), relate to whether emplo ...
.'' In ''Epic'', Justice
Neil Gorsuch authored a majority opinion which outlined that the US Congress, upon legislating the
National Labor Relations Act of 1935
The National Labor Relations Act of 1935, also known as the Wagner Act, is a foundational statute of United States labor law that guarantees the right of private sector employees to organize into trade unions, engage in collective bargaining, and ...
, likely did not wish "to confer a right to class or collective actions in
ection 7 of the NLRA since those procedures were hardly known when the NLRA was adopted in 1935." Justice
Clarence Thomas
Clarence Thomas (born June 23, 1948) is an American jurist who serves as an associate justice of the Supreme Court of the United States. He was nominated by President George H. W. Bush to succeed Thurgood Marshall and has served since 1 ...
concurred in a separate opinion, writing that the illegality of the class waiver is a public-policy defense, referring to ''McMullen'' v. ''Hoffman.''
Class action waivers, however, are not enforceable in cases of sexual assault or sexual harassment; the
117th Congress passed and President
Joe Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act in 2022 which additionally prohibited the enforcement of class action waivers. Prior to ''Epic'' and ''AT&T'',
New York and
California
California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...
have attempted to ban class action waivers, and in the case of California, use such laws to additionally invalidate arbitration agreements or allow judges to refuse to enforce class action waivers in certain circumstances. National lawmakers have also pushed to pass the proposed
Forced Arbitration Injustice Repeal Act
The Forced Arbitration Injustice Repeal (FAIR) Act of 2022 is proposed legislation in the US Congress. The comprehensive legislation would prohibit pre-dispute, forced arbitration agreements from being valid or enforceable if it requires forced ...
, which would ban the enforcement of both arbitration clauses and class action waivers in many cases today seen by some as unfair or anti-consumer.
[{{Cite web , title=The FAIR Act: A New Bill Banning Mandatory Arbitration Agreements , url=https://www.jdsupra.com/legalnews/the-fair-act-a-new-bill-banning-6049414/ , access-date=2022-12-13 , website=JD Supra , language=en]
See also
*
Arbitration clause
An arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always bind ...
*
Forced Arbitration Injustice Repeal Act
The Forced Arbitration Injustice Repeal (FAIR) Act of 2022 is proposed legislation in the US Congress. The comprehensive legislation would prohibit pre-dispute, forced arbitration agreements from being valid or enforceable if it requires forced ...
References
Contract law legal terminology
Contract law
Class action lawsuits