Avery v. TEKsystems

What’s at Stake

Corporations that are in the middle of employment lawsuits should not be able get out of litigation by imposing new fine print terms onto the employees that take away their right to sue the employer.

Update: On January 28, 2026, the Ninth Circuit ruled in this case, holding that courts can use their authority to manage class actions under Fed. R. Civ. P. 23(d) to invalidate arbitration agreements without running afoul of the Federal Arbitration Act, and that the district court appropriately exercised that authority to invalidate an arbitration agreement that was obtained through misleading communications to class members while the class action was pending. Both were issues of first impression in the Ninth Circuit. The court rejected TEKsystems’ arguments in the case and held that Rule 23(d) allows courts to invalidate arbitration agreements, and that doing so does not conflict with the FAA because Rule 23(d) is a federal procedural rule that does not single out arbitration agreements. The court also held that the particular circumstances of TEKsystems’ communications justified invalidating the arbitration agreements under Rule 23(d). Finally, the court held that the existence of a delegation clause in the arbitration agreement did not deprive the court of authority to invalidate it, concluding that the plaintiffs had specifically challenged the delegation clause by challenging the whole agreement as being obtained by improper communications with class members.

Because of this victory, corporations will not be able to avoid accountability in the courts and strip people of their rights by imposing fine print terms in the middle of a case. The Ninth Circuit confirmed that district courts can—and in fact have a duty to—regulate corporations’ use of coercive and misleading tactics when they roll out arbitration agreements in the middle of cases in an attempt to block access to the courts, and access to justice, for those who have been wronged. The court’s decision marked a decisive, precedent-setting victory that ensures the workers’ class action lawsuit can move forward in court.

Summary

In 2022, Bo Avery and his co-workers filed a class action for wage theft against their employer, TEKsystems. TEKsystems misclassified Mr. Avery and his coworkers as exempt from overtime wage and hour laws to underpay them—one of the most common forms of wage theft.

After the lawsuit was well underway in federal court, TEKsystems imposed a new agreement onto employees requiring them to give up their right to go to court. Instead, they would have to use a private arbitrator—almost certainly chosen by TEKsystems—to resolve any job-related claims. And instead of joining together as a class, they would have to do it alone, one claim at a time. These terms were sent near the end of 2023, and employees who stayed employed on January 1st were considered to have accepted the arbitration agreement—meaning there was no option to negotiate or decline the agreement and still keep their jobs. The email announcing the agreement also needlessly included the company’s own inflammatory views about class actions, deriding them as “inefficient” and only serving to “enrich lawyers.”

Because courts generally frown upon an employer using its power over workers to take away their right to go to court in the middle of their lawsuit against the employer, TEKsystems also sent an email to the employees who were part of the overtime wage and hour class action suit, giving them a chance to opt out of the updated arbitration agreements for the limited purpose of remaining part of the pending case. But this was just an empty gesture of fairness because nearly all of them hadn’t heard about the class action and didn’t understand the immediate impacts of the choice. Almost none of them chose to opt-out, which TEKsystems had been counting on.

On June 10, 2024, TEKsystems filed a motion to compel arbitration. Though the case had been in court for more than two years and the class had been certified, TEKsystems used the fine print in the updated agreement to get the case out of court and force each employee to try their claims individually in private arbitration. The district court denied this motion. TEKsystems appealed to the U.S. Court of Appeals for the Ninth Circuit. Public Justice has joined the case on appeal to make sure the employees who were part of the lawsuit can continue in court—regardless of TEKsystem’s meaningless opt-out gesture.

Core Legal Problem

The issue on appeal is whether the district court had the authority under the Federal Rules of Civil Procedure Rule 23(d) to refuse to enforce the individual arbitration agreements TEKsystems rolled out during the pending litigation.