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What Makes a Class Action Waiver Valid/Invalid?

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Large companies are always looking for ways to limit their liability. One of the biggest potential liabilities for any organization is the prospect of a class action. Whether brought by employees or customers, a class action lawsuit can cut a big chunk out of a company’s bottom line. Rather than avoiding wrongful conduct, there’s been a trend in recent years for companies to simply contract themselves out of possible class action liability. Employers, service providers, and other companies often get employees and customers to sign away their rights–often unknowingly–to bring a class action.

Are class action waivers valid? Under what circumstances might a class action waiver be deemed invalid? Read on to learn about class action waivers and, if you’ve been harmed by a defective product, false advertising, or other unlawful practices, call a California consumer protection and class action attorney for help.

What Is a Class Action Waiver?

A class action waiver is a contract or contractual provision that waives one or more parties’ right to bring a collective action for injuries arising through the contractual agreement. Under a waiver, if hundreds or thousands of people suffered the exact same harm by that company, those people would all have to bring their claims individually, rather than gathering together for a class action.

Often, the waiver is included as part of a binding arbitration agreement. Arbitration is an alternative dispute resolution system whereby the parties bring their cases before a hired arbitrator in a private proceeding, rather than a public court case. Arbitration is an inherently private process, leaving no room for collective action.

Many employers, as well as companies that provide services to the public at large (banks, internet providers, credit card companies, phone companies, television streaming companies, etc.), include arbitration agreements and class action waivers in their standard contracts. Those waivers are often buried in the fine print; people sign away their legal rights without even realizing it.

When Is a Class Action Waiver Invalid?

When two parties enter into a contract voluntarily, and the terms are clear, courts usually enforce the terms of that contract. If a contract explicitly states that one or more parties are waiving their right to bring a class action, then it would seem the agreement is valid. Under certain circumstances, however, that might not be the case.

California’s Supreme Court at one point ruled that binding arbitration agreements and class action waivers between parties of unequal sophistication and bargaining position–such as an agreement between a customer and a major corporation–were inherently unconscionable and unenforceable. The U.S. Supreme Court overruled that decision and found that federal law generally supports arbitration, even when it undercuts consumer class actions.

Even with the Supreme Court’s ruling, there might still be grounds to invalidate a class action waiver. Different rules apply to different industries. In finance (a credit card agreement, for example), you may have the option to opt out of the class action waiver when you sign up for a service or product.

In retail (for example, a claim against Netflix or Amazon), class action waivers may be unenforceable if the terms are unclear, the users were not required to scroll all the way through the conditions before agreement, users are permitted to use the service before agreeing, or users are not periodically asked to reconfirm the agreement. In employment, you may still have the right to bring claims concerning sexual harassment or discrimination despite a class action waiver or arbitration agreement.

If there are other grounds to invalidate the contract–such as if the agreement was based on fraud or misinformation–then the class action waiver might also be thrown out. Talk to a class action attorney to find out if you still have the right to bring a class action despite a class action waiver.

Protect Yourself and Your Family With Help From a Consumer Class Action Attorney

For help pursuing a class action claim in California or nationwide, including defective products, antitrust violations, unfair competition, false advertising, fraud and more, call the Kalfayan Law Firm in Del Mar, California, just north of San Diego, for a free consultation. Our zealous class action law firm serves local residents and nationwide classes with diligence and passion. We’ll see your case through to the end and seek both justice and compensation for all victims.

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