Ninth Circuit Rejects Attempt to Use Two Arbitration Losses to Wipe Out Hundreds of Employee Arbitration Agreements
Employers who use arbitration agreements received an important decision from the Ninth Circuit in O’Dell v. Aya Healthcare Services, Inc. The case arose from a wage dispute brought by former employees of a travel-nursing agency. But the broader issue was much bigger than the underlying wage claims: could employees use two earlier arbitration rulings invalidating similar arbitration agreements to prevent the employer from enforcing hundreds of other employees’ separate arbitration agreements?
The Ninth Circuit said no.
In a published opinion filed April 1, 2026, the court held the Federal Arbitration Act does not allow courts to use non-mutual offensive collateral estoppel to block enforcement of arbitration agreements. In plain English, employees who were not parties to earlier arbitrations could not use favorable rulings from arbitrations as a shortcut to defeat other employees’ separate arbitration agreements.
The Dispute Started as a Wage Case
Aya Healthcare Services places traveling nurses and other clinicians with hospitals. As a condition of employment, Aya required employees to sign agreements requiring employment-related disputes to be resolved through arbitration rather than in court. The agreements also included a delegation clause, meaning disputes about the validity of the arbitration agreement itself would be decided by an arbitrator, not a judge.
Several former employees filed a putative class and collective action against Aya. They alleged Aya improperly reduced their pay mid-contract and asserted claims including breach of contract, fraudulent inducement, state wage-and-hour violations, and violations of the Fair Labor Standards Act. Aya moved to compel arbitration, and the district court initially granted the motion.
Four Arbitrations Produced Split Results
Four named plaintiffs proceeded to separate arbitrations. Because the employees challenged the validity of the arbitration agreements, each arbitrator decided whether the agreement was enforceable.
The results were divided. Two arbitrators found the agreements unconscionable, reasoning the fee and venue provisions were too one-sided. Two other arbitrators reached the opposite conclusion, finding the agreements valid because a savings clause cured any unconscionability problem.
That split result set up the central issue on appeal.
By the time Aya moved to compel arbitration as to 255 additional employees who had opted into the case under the FLSA, the district court took a different path. Rather than sending those employees to arbitration under their own agreements, the court applied non-mutual offensive collateral estoppel. The court relied on the two arbitration awards invalidating the agreements and refused to give similar effect to the arbitration awards upholding them. As a result, the court treated hundreds of separate arbitration agreements as unenforceable.
What “Non-Mutual Offensive Collateral Estoppel” Means
The doctrine sounds more complicated than the basic idea.
“Collateral estoppel,” also called “issue preclusion,” can prevent a party from relitigating an issue already decided against it. “Non-mutual” means the person using the earlier decision was not a party to the earlier case. “Offensive” means the new plaintiff is using the prior ruling as a sword against the defendant, rather than as a shield.
Here, the 255 opt-in plaintiffs wanted to use two earlier arbitration decisions against Aya even though they were not parties to those arbitrations. They argued the earlier rulings already decided the arbitration agreements were invalid, so Aya should not get another opportunity to enforce similar agreements against them.
The Ninth Circuit rejected that approach.
The Ninth Circuit’s Holding
The Ninth Circuit held the Federal Arbitration Act does not permit non-mutual offensive collateral estoppel to be used to avoid enforcement of arbitration agreements. The court emphasized the FAA requires courts to enforce arbitration agreements according to their terms, subject to generally applicable contract defenses such as fraud, duress, or unconscionability.
The court reasoned issue preclusion is not a generally applicable contract defense. It is not a rule about contract formation or contract revocation. It is a litigation doctrine designed to prevent relitigation of issues in certain circumstances. For that reason, the court concluded it could not be used to sidestep the FAA’s command to enforce arbitration agreements.
The court also stressed the importance of consent. Arbitration under the FAA depends on the parties’ agreement. In the Ninth Circuit’s view, allowing one employee’s arbitration result to bind hundreds of other employees and the employer would erase the individualized arbitration process the parties agreed to use.
Why the Court Compared the District Court’s Approach to a Bellwether Class Action
One of the court’s more practical concerns was the effect of the district court’s ruling.
The Ninth Circuit said the district court’s approach effectively converted individual arbitrations into something like a binding bellwether class action. Two employees went first, won on enforceability, and the result was then used to prevent hundreds of other arbitrations from occurring. The problem, according to the court, was the parties had never agreed to that procedure.
The court also noted ordinary class actions include safeguards, such as requirements for adequate representation. The district court’s approach lacked those protections. Under that reasoning, one arbitration loss could potentially bind an employer across hundreds or thousands of other employee agreements without the procedural protections of a class action and without the employer’s agreement to a binding bellwether process.
What This Means for Employers
For employers, the decision is a significant defense-side arbitration ruling. It confirms plaintiffs cannot use a few adverse arbitration decisions as a shortcut to invalidate other employees’ separate arbitration agreements, at least where the FAA applies.
That does not mean arbitration agreements are immune from challenge. Employees may still argue an agreement is unconscionable, improperly drafted, unsupported by consent, or invalid under a generally applicable contract defense. The key point is each employee’s agreement must be addressed according to the governing law and the agreement’s terms. A court cannot use non-mutual offensive collateral estoppel to wipe out other employees’ arbitration agreements merely because other arbitrators reached unfavorable rulings in earlier proceedings.
The decision also reinforces the importance of careful drafting. Aya prevailed on appeal, but only after mixed arbitration results and substantial litigation. Employers should review arbitration agreements for provisions courts and arbitrators often scrutinize, including cost allocation, forum selection, venue, delegation clauses, severability or savings clauses, class and representative action language, and procedures governing employment-related statutory claims.
The Bottom Line
O’Dell v. Aya Healthcare Services, Inc. is an employer-friendly decision on arbitration enforcement. The Ninth Circuit reversed the district court and held the FAA does not allow courts to use non-mutual offensive collateral estoppel to prevent enforcement of arbitration agreements. The court returned the case for further proceedings, leaving Aya free to continue seeking enforcement of the 255 opt-in plaintiffs’ separate arbitration agreements.
O’Dell v. Aya Healthcare Services, Inc. was filed on April 1, 2026, by the United States Court of Appeals for the Ninth Circuit, Case No. 25-1528. The judgment was reversed and the case was remanded for further proceedings after the Ninth Circuit held the Federal Arbitration Act does not permit non-mutual offensive collateral estoppel to be used to prevent enforcement of separate employee arbitration agreements.