Supreme Court Upholds Workplace Arbitration Provisions and Class Action Waivers

In an important employment and labor law decision, the U.S. Supreme Court ruled today that employment agreements waiving class action claims and requiring employees to arbitrate claims on an individual basis are enforceable. Justice Gorsuch, joined by Chief Justice Roberts and Justices Kennedy, Thomas and Alito, wrote for the majority in Epic Systems Corp. v. Lewis. Justice Ginsberg, joined by Justices Breyer, Sotomayor and Kagan, dissented.

In the cases under review, an employer and employee entered into a contract providing for individualized arbitration proceedings to resolve employment disputes. The employees nonetheless sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court. The majority held that Congress has instructed in the Federal Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced. The Court rejected the employees’ argument (joined by the National Labor Relations Board), that although the FAA generally requires courts to enforce arbitration agreements as written, the FAA’s “saving clause” removes that obligation if an arbitration agreement violates some other federal law, and that, by requiring individualized proceedings, the agreements at issue violated the National Labor Relations Act. While the NLRA secures to employees rights to organize unions and bargain collectively, the Court found that it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum, and thus rejected the employees’ suggestion that the NLRA precluded enforcement of class action waivers.

The Epic Systems decision is consistent with recent Supreme Court rulings that companies doing business with consumers may require arbitration and forbid class actions in their contracts. The decision makes it all the more imperative that employers and employees carefully consider including or agreeing to such proceedings in employment agreements.

This article is intended only as a general discussion of these issues. It is not considered to be legal advice or relied upon. If you need assistance with a particular employment, IP, or commercial issue, including concerning workplace arbitration provisions, RPJ Partner Larry Brocchini would be pleased to consider providing additional details or advice about specific situations.