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Employment Law Alert – Supreme Court Rules that Class Action Waivers in Employment Arbitration Agreements are Enforceable

May 30, 2018

On Monday, May 21, 2018, the U.S. Supreme Court, in Epic Systems Corp. v. Lewis, resolved a Circuit Court split by finding that arbitration agreements in which employees agree to arbitrate any claims against their employer individually, as opposed to on a class or collective basis, are enforceable and do not contravene the National Labor Relations Act (“NLRA”). 

The plaintiff argued that being forced to waive the ability to join a class or collective action violated the NLRA, which guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

The Court disagreed with the plaintiff and held that “[t]he NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. This Court has never read a right to class actions into the NLRA – and for three quarters of a century neither did the National Labor Relations Board.”

As a result of this important ruling, employers can use employee agreements to limit class and collective actions. In addition, arbitration often moves faster than civil litigation, with less formal briefing and arguments, which can significantly cut down on defense costs. Arbitration is also typically kept confidential, so employers may now be relieved that company issues will not be litigated in a public forum.

Given the undeniable benefits that can now be realized from the proper use of arbitration agreements, employers should seriously consider whether they wish to compel arbitration by having their employees sign an appropriate arbitration agreement. If so, employers are strongly encouraged to either review and revise their existing documents or seek counsel and assistance in preparing an arbitration agreement for use going forward.  In addition, employers currently facing class or collective actions may be able to compel arbitration if the employees previously entered into agreements waiving their rights to participate in class or collective actions. Once again, don’t hesitate to ask for help!