Labor & Employment Law Daily Wrap Up, ARBITRATION—9th Cir.: Sodexo impermissibly unilaterally modified employee health plan to add arbitration provision, (Aug 5, 2025)

By Todd Harrison, J.D.

However, the health plan itself consented to arbitration for a breach of fiduciary duty claim, but a provision prohibiting representative actions was invalid under the effective vindication doctrine.

Affirming in part and reversing in part a district court’s judgment in a case involving a Sodexo employee’s claims that a monthly tobacco surcharge on his employee health insurance premiums violated ERISA, the Ninth Circuit determined that no arbitration agreement existed between the employee and Sodexo for his ERISA § 502(a)(1)(B) and § 502(a)(3) claims because the employee did not consent to arbitration. However, a valid arbitration agreement may exist between the health plan and Sodexo for the ERISA § 502(a)(2) claim, because the health plan consented. Nonetheless, the representative action waiver in the arbitration agreement violates the effective vindication doctrine, and the employee may raise unconscionability defenses under federal common law on remand (Platt v. Sodexo, S.A., No. 23-55737 (9th Cir. Aug. 4, 2025)).

In 2016, the employee enrolled in Sodexo’s employee health plan, which is governed by ERISA. The health plan required the employee to pay a monthly tobacco surcharge. In 2021, Sodexo unilaterally amended the health plan’s governing document to add an arbitration provision.

Class action. The employee filed a class action lawsuit against Sodexo in 2022. He asserted two claims under ERISA § 502(a)(3) on behalf of himself and the class, arguing that the tobacco surcharge violated ERISA by failing to provide a “reasonable alternative standard” for plan participants to avoid paying the surcharge and requisite notice of such an alternative standard. He also asserted a claim under Section 502(a)(1)(B) on behalf of himself and the class for violation of the health plan’s terms in implementing the tobacco surcharge. Finally, he asserted a claim under Section 502(a)(2) on behalf of the health plan for breach of fiduciary duty.

Arbitration motion. Sodexo moved to compel arbitration. The employee opposed the motion, arguing: (1) there was no enforceable arbitration agreement because he did not consent to arbitration; (2) even if he consented, the arbitration agreement was still unenforceable because the representative action waiver violated the effective vindication doctrine and because there are multiple unconscionable provisions, including a clause that improperly reduces the statute of limitations for breach of fiduciary duty claims and a clause that impermissibly bars the recovery of attorneys’ fees; and (3) his claim under ERISA § 502(a)(1)(B) was expressly outside of the scope of the arbitration provision.

The district court denied Sodexo’s motion to compel, holding that the employer’s right to unilaterally amend an ERISA plan did not extend to adding arbitration provisions. In addition, the court held that the employee did not consent to the arbitration provision and thus the arbitration agreement was not enforceable. Because the court concluded that the employee was not subject to a valid arbitration agreement, it did not reach his alternative arguments that the arbitration agreement was unenforceable because the representative waiver clause violated the effective vindication doctrine and that several provisions were unconscionable. Sodexo timely appealed.

Consenting party. At the outset, the court explained that because consent is required for a valid arbitration agreement, it must determine the relevant consenting party for each of the employee’s claims. For each claim, the consenting party is either the health plan participants—including the employee—or the health plan itself. To determine the consenting party, the court considered whether the specific claim existed for the benefit of the health plan participants or the health plan.

Unenforceable to employee. First, the court determined that because the employee alleged harms against health plan participants, including himself, was seeking to recover losses incurred by the health plan participants, and was seeking to enforce the rights of participants under the health plan’s terms, he was the consenting party for the Section 502(a)(1)(B) claim. In addition, the employee expressly brought the Section 502(a)(3) claims on behalf of himself and other health plan participants. Because he and the other participants were allegedly forced to pay an illegal fee, and the employee was seeking the return of those funds to the participants, the court found he was the consenting party for this claim as well.

As to whether the employee consented to arbitrate these claims, Sodexo contended that his continued participation in the health plan after it provided notice that it had added an arbitration provision was enough to show mutual assent. The court was not moved.

It was undisputed that the employee had received a short email from Sodexo in 2022 with a link to the new summary plan description, a 170-page document wherein the arbitration provision was mentioned on page 153. The court found that it was unreasonable to expect that the employee would notice a new arbitration provision hidden in a lengthy document. Further, the email contained no express language that Sodexo was adding the new arbitration provision or that continued participation in the health plan constituted consent or agreement to the new provision.

Without the employee’s consent, the arbitration provision was unenforceable as to his Section 502(a)(1)(B) and Section 502(a)(3) claims, said the court, affirming the district court’s denial of Sodexo’s motion to arbitrate these claims.

Health plan enforceability. Turning to the Section 502(a)(2) claim, the court noted that these claims are understood as being brought in a representative capacity on behalf of the health plan as a whole because the health plan participant is not seeking relief for themselves but rather recovery only for injury done to the health plan. Accordingly, the health plan’s consent alone, absent applicable defenses, is sufficient to form an agreement to arbitrate a Section 502(a)(2) claim, explained the court.

Here, the health plan document states that it “may be amended any time” by Sodexo. Based on this broad authority enabling Sodexo to amend its terms, a reasonable person would believe that the health plan consented to the arbitration provision added by Sodexo, said the court. Thus, absent an applicable defense, there was a valid agreement to arbitrate the Section 502(a)(2) claim based on the health plan’s consent.

Nonetheless unenforceable? According to the employee, even if the health plan consented to the arbitration provision, the provision was still unenforceable. He contended that the representative action waiver violated the effective vindication doctrine and was therefore unenforceable. He also raised unconscionability arguments regarding the reduction of the statute of limitations for breach of fiduciary duty claims and a clause barring the recovery of attorneys’ fees.

Effective vindication doctrine. Under the effective vindication doctrine, an arbitration provision is unenforceable if it operates as a prospective waiver of a party’s right to pursue statutory remedies, including a prohibition on the assertion of certain statutory rights. The employee argued that the arbitration provision violated the effective vindication doctrine by prohibiting him from bringing a Section 502(a)(2) breach of fiduciary duty claim. The court agreed.

In this instance, the arbitration provision contains a representative action waiver which expressly precludes the employee from bringing claims in a representative capacity on the health plan’s behalf. Because he is unable to pursue a number of remedies specifically authorized by Congress, the representative action waiver violates the effective vindication doctrine and is unenforceable, said the court.

Unconscionability. Turning to the employee’s unconscionability defenses, Sodexo argued that they were foreclosed because those defenses were based in California law and were therefore preempted by ERISA. The court disagreed, finding that these defenses were rooted and arose from federal statutes and federal common law.

“The alleged unconscionable clauses are located within the arbitration provision, which is enforced under the FAA,” said the court. Further, continued the court, the health plan is governed by ERISA, and because ERISA does not contain a body of contract law to govern the interpretation and enforcement of employee benefit plans, courts must fashion a body of federal common law to govern ERISA suits.

Because the source of law for the employee’s unconscionability defenses is federal common law, the court rejected Sodexo’s contention that the defenses were preempted. Thus, the employee may raise unconscionability defenses.

Severability. Finally, the court noted that the health plan also contains a severability clause. The arbitration provision may still be enforceable as to the employee’s Section 502(a)(2) claim if the representative action waiver can be severed from the rest of the provision. However, the court did not reach the merits of the employee’s unconscionability defenses and remanded for the district court to consider, in the first instance, the unconscionability of those clauses and the severability of both the representative action waiver and any clauses the district court may find unconscionable.

The case is No. 23-55737.

Judge: Desai, R.

Attorneys: George Allan Hanson (Stueve Siegel Hanson) for Robert Platt. Michael M. Kowsari (Jackson Lewis) for Sodexo, S.A. and Sodexo, Inc.

Companies: Sodexo, S.A.; Sodexo, Inc.

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