U.S. Supreme Court Upholds Enforceability of
Agreements that Prevent Employee Class and Collective Action Lawsuits
Are employer-mandated class action waivers
enforceable? The Supreme Courts answer: Yes.
After years of differing viewpoints opined by the
National Labor Relations Board and various conflicting Circuit Court decisions,
on May 21, 2018, the U.S. Supreme Court issued a 5-4 decision scoring a big victory for
The Court's ruling in
Epic Systems Corp. v. Lewis
provides that courts should enforce agreements that prevent employees from
bringing class and collective action lawsuits regarding their wages, hours, and
terms and conditions of their employment.
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The decision further extends to the enforceability of
arbitration agreements, explaining that agreements requiring an employee to
submit his or her employment-related claim(s) to arbitration must be enforced.
Writing for the majority, Justice Neil Gorsuch explained:
"The policy may be debatable but the law is clear:
Congress has instructed that arbitration agreements like those before us must be
enforced as written[.]"
Speaking for the four dissenting justices, Justice Ruth
Bader Ginsburg called the decision "egregiously wrong." The dissent focused on
the purpose of the National Labor Relations Act (NLRA), explaining that:
"Employees' rights [pursuant to the NLRA] to band
together to meet their employer's superior strength would be worth ... little if
employers could condition employment on workers signing away those rights."
The Court's Epic Systems decision certainly does
not give employers
carte blanche to abandon employee protections set forth in the NLRA.
Nevertheless, it provides employers with a long and hard-fought victory that
allows them to avoid class action claims through carefully crafted agreements
with their employees..
Takeaway. In light of the ruling, employers should
consult with their attorneys to determine whether class action waivers and
arbitration agreements would benefit their business. Employers who already have
such agreements in place should also review those agreements in light of
yesterday's ruling, as it does not change constitutional challenges that can be
made against the enforceability of arbitration agreements.
Employers should keep in mind that there is no "one size
fits all" approach, and their chances of enforcing class action waivers and
arbitration agreements improve with agreements that are specifically tailored
toward their workforce.