May 22, 2018

U.S. Supreme Court Upholds Class Action Waivers in Employment Arbitration Agreements

employment arbitration agreement

On Monday, May 21, 2018, the U.S. Supreme Court, in Epic Systems Corp. v. Lewis upheld the enforceability of class action waivers in arbitration agreements between employers and their employees. Justice Gorsuch delivered the opinion for the 5-4 majority holding that courts are required under the Federal Arbitration Act (“FAA”) to enforce arbitration agreements providing for individualized proceedings in the employment context, and neither the FAA’s savings clause nor the National Labor Relations Act (“NLRA”) suggests otherwise.

In 2012, the National Labor Relations Board (“NLRB”) took the position that class action waivers in arbitration agreements violated Section 7 of the NLRA, that permits employees to engage in concerted action regarding their terms and conditions of employment. However, the NLRB found little traction in the courts until April 2016, when the Seventh Circuit adopted the NLRB’s position and declined to enforce a class action waiver contained in an arbitration agreement between an employer and its employee, creating a split among the circuits. Shortly thereafter, the Ninth Circuit adopted the Seventh Circuit’s position and widened the circuit split. In January 2017, the U.S. Supreme Court accepted certiorari to address this circuit split. The Supreme Court’s decision returns the courts to their pre-2016 precedent and permits the continued use of class action waivers in arbitration agreements in the employment context.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice. If you have any questions regarding these issues, please contact your Labor & Employment Counsel at Smith, Gambrell & Russell, LLP.