Supreme Court: Employers Can Require Employees to Go It Alone in Arbitrations
Decision Upholds Class Action Waivers in Arbitration Clauses, Resolves Circuit Split
The U.S. Supreme Court issued a long-awaited decision in Epic Systems Corp. v. Lewis on May 21, 2018, holding that class action waivers in arbitration provisions are enforceable under the Federal Arbitration Act. The Court rejected the National Labor Relations Board's position that class action waivers violate federal labor laws.
The ruling will come as a relief for many employers. Before the Supreme Court released its opinion, a circuit split had led to inconsistent results across the country — with the U.S. Courts of Appeal for the Seventh, Ninth and Sixth Circuits ruling that mandatory class-waiver arbitration provisions were not enforceable, and the Fifth, Second and Eight Circuits finding that such provisions were enforceable.
Most of the disputes over class action waivers relate to overtime claims under the Fair Labor Standards Act and state law, and are frequently litigated in federal court through collective and class actions. In light of Epic Systems, if an employer has a dispute resolution provision in their agreements with employees requiring individualized arbitrations to resolve employment disputes, the courts must enforce the provisions and send each employee's dispute to be arbitrated individually, instead of being litigated as a class or collective action in federal court. The Court also held that employers can require employees to sign mandatory arbitration agreements with class action waivers as a condition of existing or, for at-will employees, continued employment.
Employers that do not currently have arbitration agreements prohibiting class treatment of employee claims should consider including them in future agreements. If traditional contract formation principles are followed and the agreement does not limit remedies or require employees to spend more than they would spend if the claim were brought in court, the agreements likely will be enforced.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.