Hunton Employment & Labor Perspectives

The Ninth Circuit recently addressed a significant question for employers: can employees rely on rulings denying arbitration in other cases to avoid arbitration under their own agreements?

In O’Dell v. Aya Healthcare Services, Inc., the court answered no.

Case Background

The issue arose in a case involving a dispute that began when several former employees of Aya Healthcare Services (“Aya”), a travel nursing agency that places nurses and clinicians with hospitals, filed a putative class action alleging a variety of claims, including breach of contract, fraudulent inducement, state wage-and-hour violations, and violations of the Fair Labor Standards Act.

As a condition of employment, each employee signed an arbitration agreement containing a delegation clause requiring an arbitrator, not a court, to decide challenges to the agreement’s validity. After the complaint was filed, Aya moved to compel arbitration and the district court granted the motion as to four named plaintiffs.

Aya then proceeded to four separate arbitrations. In arbitration, each employee challenged the validity of the agreement. The results, however, were mixed: two arbitrators found the agreements unconscionable based on the fee and venue provisions, while two others upheld the agreements as valid because a savings clause in the agreements cured any unconscionability.

An additional 255 plaintiffs later opted into the action under the Fair Labor Standards Act (“FLSA”). Aya moved to compel arbitration as to those opt-in plaintiffs as well. However, instead of requiring those employees to arbitrate under their own agreements, the district court applied non-mutual offensive collateral estoppel and relied on the two prior arbitral awards invalidating the agreements to deny Aya’s motion.

Aya subsequently appealed the decision.

The Ninth Circuit’s Decision

The Ninth Circuit reversed.

In its published opinion in O’Dell, issued on April 1, 2026, the panel stated that the district court’s approach was “erroneous” and identified several fundamental problems with using non-mutual offensive collateral estoppel to preclude enforcement of arbitration agreements.

First, the Federal Arbitration Act (“FAA”) does not permit the application of non-mutual offensive collateral estoppel that would result in the effective invalidation of arbitration agreements.

The panel explained that non-mutual offensive collateral estoppel is not a generally applicable contract defense and does not qualify as a ground for revocation under Section 2 of the FAA. The court further emphasized that a hallmark of the FAA is enforcement of arbitration agreements through individualized, one-on-one proceedings. In the panel’s words, dispensing with those bilateral proceedings simply because arbitrators in separate matters involving different parties had already decided the issue is “anathema to the FAA.”

Second, the panel concluded that the district court’s ruling effectively created a binding bellwether process without the procedural safeguards ordinarily required in class litigation, such as adequacy of representation. By allowing only two arbitral rulings to control the enforceability of hundreds of separate arbitration agreements, the district court imposed a class-like mechanism the parties had never agreed to.

Third, the panel explained that precluding arbitration based on arbitral awards issued in different proceedings involving different parties would render the parties’ mutual consent meaningless, because arbitration under the FAA is fundamentally a matter of consent and the parties’ agreement to resolve their own disputes through individualized arbitration cannot be displaced by rulings issued in separate disputes involving others.

The Ninth Circuit ultimately remanded the case to the Southern District of California for further proceedings.

Implications for Employers

The court’s ruling addresses a potentially serious vulnerability in arbitration enforcement.  

Going forward, employers should continue to review arbitration agreements regularly to ensure they are clearly drafted, consistently implemented, and expressly require individualized proceedings.

Conclusion

As arbitration challenges continue to evolve, the Court’s decision is an important reminder that the FAA still requires enforcement of arbitration agreements as written.