26 Jul Class action waiver in Arbitration Agreements
The United States Supreme Court came down with a new ruling recently and I wanted to make sure all of our clients were aware of this, as it may impact many of our clients who have employees.
If, as an employer, you haven’t thought about including a class action waiver in your arbitration agreements with your employees, or if you have actually removed such waivers as a result of California case law, you may want to reconsider including them back into your arbitration agreements. On May 21, 2018, the U.S. Supreme Court ruled in Epic Systems Corp. v. Lewis that employment arbitration agreements that bar class actions are enforceable. Finally a point in favor of business owners! The vote was 5 to 4 in favor of upholding the use of class action waivers in arbitration agreements in the workplace.
In Epic Systems, the plaintiffs attempted to argue that class action waivers as part of an arbitration agreement in the context of a workplace violated the National Labor Relations Act, asserting that class actions constituted “concerted activities” protected by the Act.
The Court rejected the plaintiffs’ arguments, drawing a distinction between the right of employees to organize and bargain collectively, and the laws governing how judges and arbitrators must try legal disputes. The Court specifically noted that the NLRA did not guarantee a right to class actions, holding that the NLRA “may permit unions to bargain to prohibit arbitration…[b]ut it does not express approval or disapproval of arbitration.” The Court’s holding – that arbitration agreements providing for individualized proceedings must be enforced, pursuant to the Federal Arbitration Act – resolved a split in authority between the Ninth, Fifth, and Seventh Circuit Court of Appeals.
Prior to the Supreme Court’s ruling in Epic Systems, the Ninth Circuit, which has jurisdiction over district courts in California, had held that class action waivers in arbitration agreements are unenforceable, with reasoning that mirrored that of the plaintiffs in Epic Systems Corp. See Morris et al. v. Ernst & Young, LLP, 834 F.3d 975 989 (9th Cir. 2016).
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