U.S. Supreme Court Upholds Enforceability of Agreements that Prevent Employee Class and Collective Action Lawsuits

May 8, 2018 Shar Bahmani Employment Law

Are employer-mandated class action waivers enforceable? The Supreme Court’s 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 employers.

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.