Court Rules Employment Contracts with Class Action Waivers Lawful, Enforceable
In what is generally being seen as a victory for employers, the U.S. Supreme Court issued a 5–4 decision on May 21 determining that arbitration agreements in employment contracts providing for individualized proceedings, and waiving the right to participate in collective or class actions, are lawful and enforceable.
The court’s decision, authored by Justice Neil Gorsuch, centered on three cases Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA, Inc., No. 16-307.
On March 27, CBIA reported on the pending court decision on forced arbitration clauses in employment contracts that banned class actions in a post by Miguel Escalera, partner at the labor and employment law firm, Kainen, Escalera, & McHale in Hartford.
Escalera explained that a win for employers “will impact all workers, unionized or not, but for organized labor, the stakes are particularly high.”
Quoting Craig Becker, a former member of the National Labor Relations Board and now general counsel of the AFL-CIO, Escalera wrote, “A decision adverse to the employees will cripple enforcement of all federal and state minimum standards legislation that depends on private enforcement, including the Fair Labor Standards Act, Title VII (prohibiting employment discrimination), the Age Discrimination in Employment Act, and the Americans With Disabilities Act, etc.”
NLRB Must Now Change Course
The National Labor Relations Board currently has 55 pending cases with allegations that employers violated the National Labor Relations Act by maintaining or enforcing individual arbitration agreements or policies containing class- and collective-action waivers. Class action waivers prevent employees from participating in class action lawsuits.
In a May 21 news release, the NLRB said it is “committed to expeditiously resolving these cases in accordance with the Supreme Court’s decision. Many other similar cases previously issued by the board are pending before the federal courts of appeals.”
The NLRB first held in 2012 that the maintenance of individual arbitration agreements containing class-action waivers violated the NLRA.
During the six years that this rule was in place, NLRB decisions invalidated arbitration agreements and policies used by many employers.
With the May 21 Supreme Court ruling, employers are permitted to maintain and enforce such class-action waiver agreements.
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