On April 1, 2026, the Ninth Circuit in O’Dell v. Aya Healthcare Services, Inc., 171 F.4th 1173 (9th Cir. 2026) held that the Federal Arbitration Act (“FAA”) protects employers from plaintiffs’ attempts to use inconsistent decisions about the enforceability of an arbitration agreement to invalidate all arbitration agreements in a class action. The court explained that extending a small number of arbitration rulings to bar arbitration for other employees would undermine the individualized nature of arbitration and conflict with the FAA’s strong policy favoring enforcement of arbitration agreements as written.
This decision is a win for California employers. It generally reinforces the enforceability of arbitration agreements in a class action context and prevents isolated arbitration enforcement losses from automatically voiding the agreements for the rest of the putative class.
Key Facts
Former employees of a travel nursing agency filed a putative class action alleging wage and hour violations. The agency’s arbitration agreements included delegation clauses assigning arbitrability issues to the arbitrator.
The district court compelled arbitration for the four named plaintiffs, but arbitrators reached inconsistent results: two upheld the agreements, and two found them unconscionable. After 255 additional plaintiffs joined the litigation, the employer again moved to compel arbitration. The district court denied the motion, applying non-mutual offensive collateral estoppel based on the adverse arbitration rulings.
Non-mutual offensive collateral estoppel doctrine allows a new plaintiff to rely on an issue previously decided against the same defendant in earlier litigation, even though the new plaintiff was not a party to that earlier proceeding.
Ninth Circuit Decision
The Ninth Circuit reversed and reasoned that the FAA permits only generally applicable contract defenses such as fraud, duress, or unconscionability, not procedural defenses like non-mutual offensive collateral estoppel.
The court further explained that the FAA requires arbitration agreements to be enforced according to their terms. By relying on a small number of prior arbitration outcomes to bar arbitration for hundreds of other plaintiffs, the district court effectively displaced the parties’ contractual agreement and replaced individualized arbitration with a court-imposed, class-like mechanism. The Ninth Circuit emphasized that arbitration is fundamentally a matter of consent, and arbitrators derive their authority solely from the parties’ agreement.
Takeaways for California Employers
- Each arbitration agreement is evaluated individually. Losing a motion to compel arbitration does not automatically prevent arbitration for other employees in a class action context.
- If an employer loses a motion to compel arbitration, consider making changes to the arbitration agreement with your legal counsel. But if the employer has removed the case to federal court, an employer has the right to directly appeal the decision and is entitled to an automatic stay while California laws do not automatically stay trial court proceedings pending the appeal.
- Carefully review the arbitration agreement to ensure that issues such as arbitrability are decided by a preferred decisionmaker, the court or arbitrator.
For questions or to discuss how this decision may impact your company’s arbitration agreement or wage-and-hour litigation strategy or for review or update of an existing arbitration agreement, please contact the author of this blog or any CDF attorney.
