In what is probably the most important labor and employment law decision of 2018, the Supreme Court ruled last week that class action waivers in arbitration agreements are enforceable. An arbitration agreement is a contract in which an employer and employee agree in advance to resolve any disputes through arbitration rather than going to court. The Supreme Court ruled that employers could require employees to waive their right to file a class action lawsuit and instead enter into arbitration.
The courts were split on this issue, with the Seventh Circuit and Ninth Circuits holding that these agreements violate the provision of the National Labor Relations Act protecting employees’ right to engage in concerted activity, i.e. activities in which employees join together to discuss workplace issues, and the Fifth Circuit holding that they did not. The Supreme Court sided with the Fifth Circuit, noting that “Congress has instructed federal courts to enforce arbitration agreements according to their terms-including terms providing for individualized proceedings.”
Going forward, employers now have the option to require their employees to waive their right to file class action lawsuits and arbitrate disputes. Employers who wish to impose class action waivers should remember that they might not be able to do so unilaterally, as they may need to provide something in exchange for their employees agreeing to amend existing contracts. Also, these agreements will still be subject to state contract law, so they will not be enforced uniformly throughout the country. Feel free to contact me if you have questions about class action waivers in arbitration agreements.
