Source: https://wyattemployment.com/2018/05/22/scotus-has-spoken-arbitration-contracts-barring-class-actions-are-lawful/
Timestamp: 2019-04-23 18:26:44+00:00

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Last year, SCOTUS agreed to decide whether arbitration agreements that prohibit employees from pursuing class and collective remedies are enforceable. At the time the Court took this issue up, various Federal Circuits were divided on the issue. To address the inconsistent rulings, SCOTUS granted certiorari in three cases: Epic Sys. Corp. v. Lewis from the Seventh Circuit; Ernst & Young LLP v. Morris, from the Ninth Circuit; and NLRB v. Murphy Oil, USA, from the Fifth Circuit. The dispute pitted the Savings Clause from the FAA, 9 U.S.C. §2, (which allows invalidation of arbitration agreements only “upon such grounds as exist at law or in equity for the revocation of any contract”) against employees’ rights to engage in protected, concerted activity under the NLRA, 29 U.S.C. §157.
The National Labor Relations Board (“NLRB”) has previously argued that arbitration agreement provisions requiring employees to waive their rights to pursue class and/or collective actions violate an employees’ right to engage in protected, concerted activity under the NLRA. In May 2016, the Seventh Circuit agreed with the NLRB and concluded in Epic Sys. Corp. v. Lewis, 823 F.3d 1147 (7th Cir. 2016), that an arbitration agreement prohibiting collective action violates Section 7 of the NLRA and is unenforceable under the FAA. Shortly thereafter in August of 2016, the Ninth Circuit concurred in Morris v. Ernst & Young U.S. LLP, 834 F.3d 975 (9th Cir. 2016). The Ninth Circuit concluded that employees’ substantive rights to pursue collective remedies under the NLRA cannot be waived in an arbitration agreement. Conversely, in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), the Fifth Circuit held that the FAA’s policy favoring arbitration trumps any rights employees have to engage in concerted activity under the NLRA, including pursuing class or collective actions against employers. From the Fifth Circuit’s perspective, the use of class or collective action procedures is not a substantive, but rather procedural, right. The Second and Eighth Circuits agreed with the Fifth Circuit.
Also, the Court rejected the argument that class action waivers are invalid pursuant to Section 7 of the NLRA. On this issue, Judge Gorsuch wrote “Section 7 focuses on the right to organize unions and bargain collectively. “It may permit unions to bargain to prohibit arbitration…But it does not express approval or disapproval of arbitration. It does not mention class action or collective action procedures. It does not even hint at a wish to displace the [FAA] – let alone accomplish that much clearly and manifestly, as our precedents demand.” Thus, the Court reversed the judgments in Epic Systems and Ernst & Young and remanded the two cases for further proceedings consistent with the Court’s opinion. The Court affirmed the judgment in Murphy Oil.
What are Employers to do next?
If you are an employer that utilizes arbitration agreements, now is an excellent time to review them to ensure that you are taking full advantage of the holding discussed in this SCOTUS ruling. If your organization is contemplating the use and implementation of arbitration agreements for the first time, our firm can assist in drafting such documents. Arbitration can be an effective way to address employment disputes. Now that SCOTUS has clarified that arbitration agreements can include class action waivers, it makes good business sense to review and revise your arbitration agreements. If you need assistance with your arbitration or employment agreements, please contact us at Wyatt, Tarrant & Combs, LLP. Our team can help your company obtain maximum benefit of this new decision.
Categories: Employment Discrimination, Employment Law, Uncategorized | Permalink.

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