By:  Jenna K. Leslie

Yesterday, the Supreme Court of the United States issued a significant victory for employers when ruling that class and collective action waivers in employment arbitration agreements are fully enforceable under the Federal Arbitration Act (FAA) and do not violate an employee’s rights under the National Labor Relations Act (NLRA).

In Epic Systems Corp. v. Lewis (a companion case to National Labor Relations Board v. Murphy Oil USA and Ernst & Young LLP v. Morris), the high court issued a 5-4 decision upholding the validity of class action waivers in arbitration agreements.  Justice Neil Gorsuch, writing the majority opinion, explained that the FAA unequivocally requires federal courts to enforce arbitration agreements according to their terms, and nothing in the NLRA, which was enacted after the FAA, was intended to negate that requirement.  The opinion specifically found that Section 7 of the NLRA focuses on an employee’s right to organize and bargain collectively, but it does not create a right to pursue class or collective action lawsuits.

Writing for the dissent, Justice Ruth Bader Ginsburg called the majority opinion “egregiously wrong” and argued that the NLRA was intended to equalize the power imbalance in most employment relationships by allowing employees to band together through collective action to improve the terms and conditions of their employment.  The majority opinion rejected this notion, concluding that there is nothing in the NLRA that suggests a clear intention to displace the provisions of the FAA.

In recent years, employees have effectively used class and collective action procedures to bring massive wage and hour claims in both state and federal court.  This decision will curb those lawsuits and allow employers to rely on the enforceability of class and collective action waivers and arbitration provisions within their employment agreements.  Class and collective action waivers are useful tools used to preserve confidentiality, resolve claims more quickly, and limit potential exposure to collective action lawsuits.

This decision is said to affect at least 25 million existing employment agreements.  Employers should review their employment arbitration agreements carefully to determine which agreements are affected by this decision.  Employers should also consider whether it makes sense to implement such agreements prospectively, as the decision paves the way for employers to include class and collective action waivers in future employment agreements.

If you have questions about this material, please contact Jenna K. Leslie or  any other attorney you have been working with at Lindner & Marsack, S.C.

We look forward to seeing many of you tomorrow at our 2018 Annual Compliance/Best Practices seminar held at the Sheraton Hotel in Brookfield, Wisconsin.