Class Action / Arbitration Waivers
Class Action Waivers are sections of a contract that prevent someone from filing a class action lawsuit and can be found in many different types of contracts, including employment contracts. A class action lawsuit is where many people all sue someone for the same reason. When a person signs a class action waiver, they are no longer allowed to join other people who are suing for the same issue. Class action lawsuits can be a more efficient and effective way to sue a company as filing lawsuits can be expensive, it is better to split those costs between many people instead of one. In some cases, where the amount per person can be small, but cumulatively quite large, it may only make sense to sue if there is a large class to pursue wrongdoing. Additionally, class action lawsuits can be very expensive for the company being sued. If a company loses, they can be forced to pay the group of people a large amount of money to be split amongst them. This is more expensive than if they had to pay only one person for any damages that they caused.
The ability to join a class action lawsuit is important because it is sometimes the only way that a person can get fair compensation for their problem. If the person is only asking for a small amount of money, it may be difficult to find a lawyer to represent them because the cost of suing the company may be more than the compensation they are seeking.
Class Action Waivers are often found in arbitration agreements. Companies often require that people settle their issues through arbitration. Some states, such as California, have determined that the use of arbitration is unfair and the courts there will not enforce these provisions.
Example: Sally applied for a job and was hired at a fast food restaurant as a cook. In her employment contract, the restaurant included a class action and arbitration waiver. One day, Sally burned her hand while making French fries. She soon learned that a lot of her coworkers had also burned their hands because they all used the same method that was required by the restaurant. Sally and her coworkers wished to sue the restaurant for unsafe working conditions in a class action lawsuit. Unfortunately, because she signed the waiver, Sally was unable to do so. The medical bills for her hand were $3000 but the arbitrator determined that Sally was partially to blame and therefore the restaurant only owed Sally $1000.
Sample Provision – Credit Card User Agreement:
Arbitration shall proceed solely on an individual basis without the right for any Claims to be arbitrated on a class action basis or on bases involving claims brought in a purported representative capacity on behalf of others. The arbitrator's authority to resolve and make written awards is limited to Claims between you and us alone. Claims may not be joined or consolidated unless agreed to in writing by all parties. No arbitration award or decision will have any preclusive effect as to issues or claims in any dispute with anyone who is not a named party to the arbitration. Notwithstanding any other provision in these Terms and Conditions (including the “Continuation” provision below), and without waiving either party's right of appeal, if any portion of this “Class Action Waiver and Other Restrictions” provision is deemed invalid or unenforceable, then the entire Arbitration Provision (other than this sentence) shall not apply.