THE SCOTUS DECISION IS FINALLY HERE – Revisit Your Arbitration Agreements!

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May 21, 2018

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At long last, the U.S. Supreme Court finally issued its ruling on whether or not class action waivers in arbitration agreements violate the National Labor Relations Act (“NLRA”) – short answer, they don’t.

Class action waivers in arbitration agreements allow employers and employees to resolve their disputes individually through arbitration, rather than on a class-wide or multiple employee basis. In the consolidated cases of NLRB v. Murphy Oil Co., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris, the Supreme Court resolved a split of authority among the circuit courts in favor of the Federal Arbitration Act (“FAA”). Specifically, the Court stated that because the FAA “instructs federal courts to enforce arbitration agreements according to their terms,” and there is nothing in the NLRA that specifically prohibits class action waivers or even discusses arbitration agreements or procedures, employers and employees are able to enter into arbitration agreements with class action waivers.

Additionally, the Court stated that the FAA only allows courts to refuse to enforce arbitration agreements on grounds that would apply to “any” contract (e.g., fraud, duress, unconscionability). Moreover, the Court reinforced the principle that parties may “contract to depart from [class action rules] in favor of individualized arbitration procedures of their own design.”

Finally, the Court noted that employees in the consolidated cases were suing employers under the Fair Labor Standards Act (“FLSA”), not the NLRA. There is long-standing precedent that class actions, like those permitted under the FLSA, do not “displace the [FAA] or prohibit individualized arbitration proceedings.”

Employers may want to revisit their arbitration agreements in light of this new ruling, particularly those employers with businesses located in the Sixth, Seventh, and Ninth Circuits where class action waivers were previously ruled invalid. Employers should note this ruling applies to arbitration agreements that are subject to the FAA. If a type of employee, employer, or claim is exempt from or not subject to the FAA, other federal or state laws may apply to class action waivers.

Action Items

  1. Read the recent Supreme Court decision here.
  2. Employers should contact their legal counsel for review of their arbitration agreements and this ruling. Blue Rock program subscribers may contact jsosa@managease.com to take advantage of this opportunity.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2018 ManagEase

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