Ninth Circuit Reverses Ban on Aya Healthcare Employee Arbitrations
The Ninth Circuit reversed a lower court and revived arbitration agreements for over 250 Aya Healthcare employees.
Why it matters: The decision clarifies how non-mutual offensive collateral estoppel applies to arbitration agreements in California. Employment counsel must heed the renewed importance of consent and individualized arbitration under the FAA for drafting and litigating agreements.
- On April 1, 2026, the Ninth Circuit reversed invalidation of Aya Healthcare's arbitration agreements.
- District court had relied on two prior unconscionability findings to halt arbitration for 250+ employees.
- The appellate court held such use of collateral estoppel clashed with the Federal Arbitration Act.
- Consent and individualized proceedings were reaffirmed as bedrock FAA principles.
The Ninth Circuit's April 1, 2026 decision in O’Dell v. Aya Healthcare Services, Inc. delivers a clear message to California employers: efforts to use non-mutual offensive collateral estoppel to broadly invalidate arbitration agreements will not stand under the Federal Arbitration Act (FAA).
- The case stemmed from a putative class action by former Aya Healthcare employees who alleged wage violations, including pay cuts during their contracts.
- The district court had blocked arbitration for over 250 additional employees, relying on two prior arbitrators' findings that the agreements were unconscionable.
- The Ninth Circuit found this approach to be incompatible with the FAA, noting that "the application of non-mutual offensive issue preclusion would violate the principle of consent that the FAA incorporates," according to Judge Eric C. Tung.
- Judge Tung also underscored: "A hallmark of the FAA is the enforcement of arbitration agreements and the resolution of disputes in individualized, one-on-one proceedings."
For in-house counsel and employment lawyers, the key takeaway is that consent and contract-specific analysis remain essential when drafting and enforcing arbitration clauses. Attempting to use previous arbitration outcomes to bind additional employees, without individual analysis, runs afoul of federal law.
While the ruling addresses procedural defenses, it leaves open questions on how future California courts will apply it to similar disputes, especially as employee-side challenges to arbitration continue to evolve. For now, employers should review arbitration practices to align with the FAA's core requirements.
By the numbers:
- April 1, 2026 — Date of Ninth Circuit reversal
- Over 250 — Number of affected employees
- Two — Prior arbitral awards relied upon by the district court
Yes, but: The full long-term impact on enforcement patterns in state courts remains to be seen.