Supreme Court upholds Arbitral Class Action Waivers - Articles

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Posted by: Robert Arrington on Jun 26, 2018

The United States Supreme Court on May 21 released its long-awaited decision in the case of Epic Systems Court v. Lewis, consolidated before the court with two other cases in which certiorari had been granted, Ernst & Young LLP. v. Morris, and National Labor Relations Board v. Murphy Oil USA Inc. The common issue in all three cases was whether class action waivers in employment agreements that provide for the individual arbitration of claims are invalid under Sections 7 and 8 of the National Labor Relations Act (NLRA), which protects the rights of employees to engage in “concerted activity”.

The 7th and 9th Circuits had answered this question in the affirmative, while the 5th Circuit had held to the contrary. (The 8th Circuit had sided with the 5th, but there was no case from that circuit before the Court.) Resolving the split among the circuits, the Supreme Court, in a 5-4 decision in which the majority opinion was drafted by Justice Gorsuch, held that the NLRA was not intended to trump the provisions of the Federal Arbitration Act, which provides for the enforceability of agreements to arbitrate, except on grounds applicable to contracts generally. Thus, the NLRA does not prohibit including a waiver of bringing or participating in a class or collective action in an employee’s agreement to arbitrate.

Justice Thomas joined in the majority opinion, along with the Chief Justice and Justices Alito and Kennedy. Justice Ginsberg wrote a dissenting opinion, in which Justices Breyer, Sotomayor, and Kagan joined.

Thus, in the absence of Congressional action, employers who maintain alternative dispute resolution plans applicable to all or certain categories of employees, and whose plans provide for resolution of claims by individual arbitration, can continue to maintain their plans without alteration. There will doubtless be legislation introduced to overturn this decision. Whether such legislation is likely to be enacted will depend on the political and legislative processes.