The Employer's Legal Resource: SCOTUS Upholds Employer Arbitration Agreements Requiring Employees to Waive the Right to Pursue Class and Collective Claims

07.02.18

We have previously discussed the legality of including mandatory arbitration provisions in employment agreements which, in addition to requiring employees to submit claims to arbitration, also require employees to waive their right to bring a class action or collective action. The National Labor Relations Board takes the position that such provisions interfere with an employee's right under §7 of the National Labor Relations Act (NLRA) to engage in concerted activity and therefore violates §8(a)(1) of the NLRA. (Remember, these rights exist regardless of whether the employee is represented by a union.) That position was upheld by federal appeals courts in the Seventh and Ninth Circuits. Other courts, however, have rejected the NLRB's position, most notably the Fifth Circuit and the well-known decisions in D.R. Horton and Murphy Oil. Those courts hold the Federal Arbitration Act overrides anything in the NLRA to the contrary.

The United States Supreme Court has now resolved the issue in a 5-4 ruling. In Epic Systems v. Lewis, the Supreme Court upheld an employment agreement which required the employee to submit claims against the employer to arbitration, and prohibited the employee from combining his individual claim with similar claims of other employees. Thus, employment agreements which provide for mandatory arbitration only an individual basis are enforceable.

The decision in Epic Systems will have broad and immediate effect. The NLRB has already issued a statement saying it recognizes and respects the Supreme Court's decision in Epic Systems. The NLRB states it has 55 pending cases affected by the decision which it will resolve in accordance with the decision. Numerous lower federal courts will also be asked to apply Epic Systems in pending and newly filed cases. And even state and local jurisdictions which have not enforced arbitration provisions which prohibit class or collective actions based on the NLRB's position prior to Epic Systems will be required to revisit and change their position.

The Supreme Court's decision rested on statutory, not constitutional, grounds. That means Congress can step in and overturn the Supreme Court's decision if it chooses. Indeed, while the Epic Systems case was pending, in December 2017 Senators Lindsey Graham (R-S.C.) and Kirsten Gillabrand (D-N.Y.) introduced a bill which would prohibit employment agreements from containing clauses requiring mandatory arbitration to resolve claims of sexual harassment or other discrimination. Congressional action will have to be monitored to determine whether Congress overturns Epic Systems in whole, or prohibits mandatory arbitration of individual claims for specific causes of action.

By Jon E Brightmire, jbrightmire@dsda.com

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Rebecca D. Bullard

Rebecca D. Bullard

Rebecca represents clients primarily in labor and employment litigation and counsels clients regarding everyday employment matters. 

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