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The Supreme Court Upholds Arbitration Agreements That Waive Employees’ Right to Join a Class Action

On May 21, 2018, the United States Supreme Court issued an opinion (5-4) that upheld class-action waivers in arbitration agreements. The ruling gives businesses the ability to prevent employees from joining together to file claims for work-related issues.  Rather, pursuant to this decision, when employees enter into employment agreements that contain arbitration agreements, each employee must file an individual arbitration claim when a suspected violation arises.

For years, employees have relied on collective or class actions to strengthen the bargaining power between employer and employee.  To combat the high cost of litigation, employers have increasingly asked employees to sign employment agreements that, among other items, require employees to resolve conflicts through one-on-one arbitration.

The Supreme Court’s opinion in Epic Systems Corp. v. Lewis resolved three cases that were argued together on the first day of the term: Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil USA.  The facts of each case were similar: an employee who had signed an employment agreement that contained an arbitration provision filed a lawsuit in federal court, seeking to bring both individual and collective claims. The employers argued the provisions of the arbitration agreements required that the employees proceed with individual arbitrations.  The Supreme Court agreed, holding that each employee must file an individual arbitration claim when a suspected violation arises.

Specifically, the Supreme Court’s majority held that neither the Federal Arbitration Act (FAA) nor the National Labor Relations Act (NLRA) rendered arbitration agreements’ class-action waivers unlawful.  Moreover, the majority held that Section 7 of the NLRA does not expressly approve or disapprove arbitration.

While this decision is certainly a win for employers, arbitration can also be advantageous to employees.  For example, the arbitration process is typically faster than civil litigation and is also confidential.  Moreover, arbitration protocol must comply with state and federal requirements and, therefore, is not the “free for all” it is sometimes portrayed to be; the key to a successful arbitration is to retain a fair, competent arbitrator.