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By: Paul Derrick
Class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), says the U.S. Supreme Court in a much-anticipated decision.
The Supreme Court’s long-awaited decision resolves a circuit split on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). By a 5-4 margin, the Court ruled that, under the FAA, arbitration agreements providing for individualized proceedings, rather than class or collective actions, are enforceable.
Arbitration agreements that require employees to pursue work-related claims in arbitration, rather than in court, have long been enforced pursuant to the FAA. Six years ago, however, the National Labor Relations Board decided that employers violate the NLRA when they require employees, as a condition of employment, to agree that they will resolve workplace disputes individually pursuant to an arbitration provision containing a class or collective action waiver.
The Supreme Court’s opinion makes it clear that the Board and various courts were wrong in believing that the NLRA trumps the FAA. It noted that that nothing in a class or collective action waiver interferes with an employee’s right to participate in a union or engage in collective bargaining.
So, what does the Court’s ruling mean for employers right now?
First, they should look at their arbitration agreements and consider modifying them to include class action waivers if they are not already included.
Second, they should consider including an arbitration agreement and class waiver provision as part of their onboarding paperwork (but remember such clauses should not be included within the text of an employee handbook).
Finally, employers should expect that there is more litigation yet to come as employees and unions angle for ways to get around the Supreme Court’s decision. Especially in states such California, there are other avenues by which employees can still maintain class and collective actions as a means of redressing their workplace disputes. Despite these anticipated end-run attempts, employers should rest better knowing that the Supreme Court has explicitly approved the use of class action waivers in arbitration agreements.
If you have any questions or would like more information about this or any other labor law issue, please contact Paul Derrick at [email protected].