Source: https://www.lewisrice.com/publications/u-s-supreme-court-finds-that-class-action-waivers-in-employment-arbitration-agreements-are-enforceable/
Timestamp: 2019-04-18 16:27:09+00:00

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Following six years of uncertainty, employers now have assurance that class action waivers in arbitration agreements are enforceable and do not violate the National Labor Relations Act (NLRA). Since 2012, many employers who had entered into written agreements with employees to individually arbitrate employment disputes such as wage-hour claims, found certain courts disregarding such arbitration agreements and thereby allowing employees to bring class and collective actions regarding employee disputes. In a 5–4 decision, the U.S. Supreme Court in Epic Systems Corp. v. Lewis, Case No. 16-285, resolved this uncertainty, holding that the Federal Arbitration Act (FAA) encourages enforcement of arbitration agreements and that agreements to arbitrate disputes through individualized arbitration proceedings do not violate the NLRA. Employees who have entered into class action waivers with their employers can no longer use the NLRA as a basis to evade their agreement to individually arbitrate their employment disputes.
Although arbitration agreements between employers and employees have been enforced since the early 20th century, the 2012 decision from the National Labor Relations Board (NLRB) D. R. Horton, Inc., 357 N.L.R.B. 2277 (2012), challenged this accepted practice by holding that arbitration agreements requiring employees to resolve work-related disputes through individual arbitration proceedings rather than through class or collective actions (which include other employees) violate rights to collective action under Section 7 of the NLRA.
Somewhat predictably, Federal Courts of Appeal subsequently had differing views regarding the NLRB’s decision in D. R. Horton. In N.L.R.B. v Murphy Oil USA, Inc., the U. S. Court of Appeals for the Fifth Circuit rejected the NLRB’s ruling in D. R. Horton, concluding that the FAA protected the parties’ arbitration agreement from interference by courts and that the NLRA did not prohibit employer-employee agreements requiring individual arbitration of employment disputes. However, the Seventh and Ninth Circuits followed the new direction of the NLRB. In Epic Systems, the Seventh Circuit held that arbitration agreements that prohibit employees from bringing or participating in class or collective actions violate the NLRA’s “concerted activities” clause, which guarantees employees “the right . . . to bargain collectively . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157. In Ernst & Young LLP v. Morris, the Ninth Circuit followed the Seventh Circuit and the NLRB, leading to the Supreme Court’s ruling in Epic Systems (which consolidated the appeals in Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; and National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307).
The effect of Epic Systems Corp. v. Lewis for employers is significant and can mean the difference between a business addressing an individual arbitration regarding claims of one employee instead of a lawsuit with claims on behalf of dozens, hundreds or more employees. Filings of class and collective actions based on alleged wage-hour claims under the FLSA and state laws have increased dramatically in recent years, with many judgments and settlements in the millions of dollars. The decision in Epic Systems allows employers to rely on their agreements with employees to individually arbitrate such claims, providing an avenue for employees to address their individual concerns while allowing employers to avoid expensive and onerous class action litigation (which can lead to expensive settlements).
The employment lawyers at Lewis Rice assist their clients in all aspects of the drafting, enforcement, and defense of employment agreements, including arbitration agreements. If you would like to discuss the Epic Systems Corp. v. Lewis decision further, or if you would like assistance with your own employment issues, please feel free to contact us.

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