Class Action Waivers: What They Are And How To Use Them

As an online business owner, you’ve probably put some thought into protecting your content, getting paid on time, and keeping customer disputes to a minimum. But have you considered what would happen if multiple customers filed a lawsuit against you as a group?

That’s where a class action waiver comes in. This often-overlooked contract clause can help prevent group lawsuits, ensuring that any legal disputes with your customers, clients, or vendors are handled one-on-one instead of turning into an expensive, drawn-out battle.

I’m a lawyer for online entrepreneurs and I also sell legal templates. All of my contract templates include an optional class action waiver and here’s what that means and why:

Legal Disclaimer: This post is for educational purposes only and does not constitute legal advice. Read full disclaimers.

What Is a Class Action Waiver?

A class action waiver is a contract clause that says if a legal dispute arises between the parties, each person must handle their claim individually and cannot join a group lawsuit.

Without a class action waiver, if multiple customers or clients had the same complaint (for example, they didn’t like your refund policy or felt misled by your course materials), they could team up and file a lawsuit together. This raises the stakes, increases legal costs, and creates more pressure to settle, even if their claims are weak.

By including a class action waiver in your contracts, you’re setting the expectation that any disputes must be handled on an individual basis, rather than as part of a large, collective lawsuit.

Where Would I Use a Class Action Waiver?

A class action waiver is an important contract term that may help protect you from large-scale legal disputes. If you run a blog, sell digital products, offer online courses, or provide services, it’s worth considering including this clause in your contracts to set clear expectations for how disputes will be handled.

If you’re using contracts from my Contract Store rest assured that a class action waiver is already included in each template, so you don’t have to worry about adding it yourself.

Here are some common agreements where a class action waiver may be particularly useful:

1. Terms of Use for Your Website or Digital Products

If you sell e-books, templates, stock photos, or digital downloads, your Terms and Conditions of Use can include a class action waiver. This helps set expectations for dispute resolution and may reduce the risk of multiple customers joining together in a group lawsuit.

2. Online Course or Membership Agreements

Selling an online course or running a paid membership? A class action waiver in your Terms and Conditions can help limit legal risks by discouraging students or members from filing a group lawsuit over issues like billing disputes, course content, or refund policies.

3. Client Contracts for Services

If you offer coaching, consulting, or freelance services, a class action waiver may help ensure that any disputes are handled on an individual basis. This means that if a client has an issue, they would need to resolve it separately, rather than as part of a mass lawsuit.

4. Affiliate and Sponsored Content Contracts

If you have brand partnerships, sponsored content deals, or affiliate relationships, including a class action waiver in these agreements can help prevent multiple affiliates or sponsors from teaming up in a legal dispute over commissions, deliverables, or payment terms.

5. Any Other Agreement Where You Set Legal Terms

If you use contracts to define the terms of your relationships with customers, clients, or business partners, adding a class action waiver may be a smart move. It can provide an extra layer of legal protection and help ensure that disputes are resolved on an individual basis, rather than becoming large-scale legal battles.

While class action waivers can be beneficial, it’s always a good idea to check whether they are enforceable in your particular situation, especially if you serve customers in places with strict consumer protection laws.

Is a Class Action Waiver Always Enforceable?

While class action waivers are legal and enforceable in most states, there are exceptions. Some jurisdictions limit or prohibit them in certain types of contracts, like California, for example.

Why Would This Clause Not Hold Up in Some Places?

California, for example, has strict consumer protection laws that do not allow businesses to prevent consumers from joining a class action lawsuit. This means that if a California resident buys your course or digital product and later wants to sue as part of a group, a California court will likely not enforce the waiver and may allow the class action lawsuit to proceed, at least for California customers.

However, if your waiver is valid in other jurisdictions, a California plaintiff would not automatically be able to bring in customers from those jurisdictions. Courts look at where the other customers live and what state’s contract laws apply.

Does That Mean You Shouldn’t Use It?

No, you should still include this waiver. Here’s why:

1. It is enforceable in many jurisdictions. While California has strict rules, many other jurisdictions do allow class action waivers. By including it, you protect your business everywhere it is valid.
2. It limits the size of potential lawsuits. Even if California does not enforce the waiver, the lawsuit may only apply to California customers rather than becoming a nationwide class action. This can significantly reduce legal risk.
3. It works well with other legal protections. A class action waiver is stronger when combined with an arbitration clause, which requires disputes to be handled privately rather than in court. Arbitration agreements are often more enforceable than class action waivers in places like California.

Class Action Waivers Are Usually A Good Idea

A class action waiver is an important contract clause that helps reduce your legal risk as an online business owner. It prevents group lawsuits, ensures disputes are handled individually, and adds an extra layer of protection to your contracts.

If you’re using contracts from The Contract Edit Contract Store, this clause is already included for you in the dispute resolution provision, so you don’t have to worry about adding it yourself.

While class action waivers may not be enforceable everywhere, they are still worth including because they are valid in many states and can help limit the scope of legal disputes.