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An Epic Decision: Supreme Court Upholds Class Action Waivers in Arbitration Agreements

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by Adam Shafran

On May 21, 2018, in a highly anticipated 5-4 decision, the United States Supreme Court ruled that class action waivers in employment arbitration agreements prohibiting employees from bringing class action lawsuits are enforceable and do not violate the National Labor Relations Act. The decision in Epic Systems Corporation v. Lewis maintains the status quo and puts an immediate halt to the National Labor Relations Board’s ongoing attempt to invalidate mandatory class action waivers within arbitration agreements. This decision is significant for employers regardless of the state in which they are located.

In Epic, the employees attempted to invalidate class action waivers they signed within arbitration agreements as a condition of their employment by arguing that such waivers violate the National Labor Relations Act. More specifically, the employees asserted a class action waiver provision is illegal and unenforceable because the National Labor Relations Act prohibits employers from adopting policies that inhibit employees from engaging in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The employees argued that by requiring them to give up their rights to bring a class action lawsuit on behalf of other employees, the employer had adopted a policy that prevented the employees from engaging in activities for mutual aid and protection in violation of the National Labor Relations Act. Five justices on the Supreme Court disagreed and held that the right to bring a claim, whether jointly – such as two individuals in one action – or in a class action, is not the type of “concerted activity” protected by the National Labor Relations Act. Ultimately, the Supreme Court concluded that class action waivers in arbitration agreements can only be invalidated on traditional contract grounds; i.e. unconscionability, duress, lack of consideration, etc. If an employee is not able to adequately raise a contract defense to the enforcement of a class action waiver, a court must uphold the class action waiver clause contained in the arbitration agreement.

Ultimately, the decision to require an employee to sign an arbitration agreement with a class action waiver requires a more detailed analysis as there are many pros and cons to such an agreement. The Supreme Court’s decision in Epic, however, gives employers peace of mind in knowing that if they elect to use arbitration agreements and class action waivers, they will likely be enforced by a court.

Rudolph Friedmann attorneys can help evaluate both whether an arbitration clause makes sense for your company and whether there are any other employment issues an arbitration agreement can address.