Source: https://www.natlawreview.com/article/it-s-epic-supreme-court-approves-class-action-waivers-employment-agreements
Timestamp: 2019-04-25 16:12:07+00:00

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The U.S. Supreme Court has again emphasized that parties to arbitration agreements have great latitude in structuring their agreements, including the ability to require bilateral — as opposed to class — arbitration. In Epic Systems Corp. v. Lewis,  the Court made clear that employers may include class-action waivers in their arbitration agreements with employees. In a 5-4 decision, the Court held that such waivers are enforceable under the Federal Arbitration Act (“FAA”), and that nothing in the National Labor Relations Act (“NLRA”) precludes enforcement of such waivers. The Epic decision resolves a circuit split, in which the Second, Fifth, and Eighth Circuits permitted employers to use class-action waivers, but the Sixth, Seventh, and Ninth Circuits had ruled class-action waivers violated substantive rights of employees under the NLRA. The Court, recognizing the import of the separation of powers between Congress and federal courts, examined the textual interplay between the FAA and the NLRA in concluding that Congress did not address arbitration in the NLRA, and thus that the NLRA provided no basis for invalidating class-action waivers in arbitration agreements.
The FAA provides that “a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”  As such, “courts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms,” unless barred by a “generally applicable contract defense.”  Because a state law barring class-action waivers in arbitration agreements is not such a defense, the FAA would preempt it.  A federal law, on the other hand, requires a different analysis, namely determining whether Congress intended the law — for instance, the NLRA — to preclude certain forms of arbitration agreements.
In determining that class-action waivers in employee arbitration agreements are enforceable, the Supreme Court provided a clear pathway for employers nationwide to begin or continue using such agreements. Employers that do not have arbitration clauses in their employment agreements may want to review their employment agreements and consider whether it makes sense to add such clauses. Employers that already have arbitration agreements in their employment contracts may want to consider whether revisions to those agreements, such as adding class/collective action waivers, make sense in the wake of the Court’s decision.
 Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444 (U.S. May 21, 2018), consolidated with Ernst & Young LLP et al. v. Stephen Morris et al., No.16-300, and NLRB v. Murphy Oil USA Inc., No. 16-307.
 AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745–46 (2011).
 For more background on this issue see The Supreme Court Hears Argument to Decide Whether Class-Action Waivers in Employment Arbitration Agreements Are Enforceable, K&L Gates Alert (Oct. 2017), and Arbitration Is Back on the Docket: The Supreme Court to Review the Enforceability of Class Action Waivers in Employment Arbitration Agreements, K&L Gates Alert (Jan. 2017).
 D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 361 (5th Cir. 2013).
 Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1157 (7th Cir. 2016), cert. granted, (U.S. Jan. 13, 2017).
 Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444, at *17 (U.S. May 21, 2018).
 Id. at *8 (internal quotations and citations omitted).
 Id. For further discussion of Congress’s repeal of the Bureau’s arbitration agreements rule, see the K&L Gates Consumer Financial Services Watch blog.
 Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444, at *18 (U.S. May 21, 2018) (Ginsburg, J. dissenting).
 Id. at *21 (emphasis in original).
Todd Nunn is a partner in K&L Gates' Seattle office. His practice emphasizes employment law, class action defense and electronic discovery.

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