Arbitration Agreements and Class Action Waivers – SCOTUS weighs in.

Employment contracts have various provisions within them to govern many aspects of the employee-employer relationship. These provisions can govern the issue of pay, leave, and termination. However, one issue that sometimes arises is how an employee may pursue legal action against their employer. While most times employees will use the courts to procure a legal remedy, some employment contracts will limit an employee’s ability to sue their employer, forcing them to instead seek recourse through some other form of dispute resolution. One way to do this is by including an arbitration provision in the employment contract and by better understanding how such a clause works and how the U.S. Supreme Court’s recent rulings affect these clauses, you can understand the issues that may arise if you wish to sue your employer with such a clause in your employment contract.

Sample Arbitration Agreement.  These Arbitration Agreements can be used to limit employees' access to the courts.

To begin with, “[a]n employee who signs an arbitration agreement promises to pursue any legal claims against the employer through arbitration, rather than through a lawsuit.”1)Signing an Arbitration Agreement With Your Employer, NOLO, https://www.nolo.com/legal-encyclopedia/signing-arbitration-agreement-with-employer-30005.html (last visited Dec. 28, 2017). While this may sound like a minor difference to start with, it is worth noting that arbitration is designed to work in favor of the employer because “an arbitration is heard and decided by an “arbitrator” — a private citizen (often a retired judge) who is paid by one or both sides to listen to the evidence and witnesses. That means you won’t have a jury hear your story — and juries are often sympathetic to employees.”2)Signing an Arbitration Agreement With Your Employer, NOLO, https://www.nolo.com/legal-encyclopedia/signing-arbitration-agreement-with-employer-30005.html (last visited Dec. 28, 2017). Further, you cannot appeal an arbitration decision like you could do with a court case, meaning if the arbitrator sides with your employer, you have no real chance to appeal the decision.3)Signing an Arbitration Agreement With Your Employer, NOLO, https://www.nolo.com/legal-encyclopedia/signing-arbitration-agreement-with-employer-30005.html (last visited Dec. 28, 2017). 

Recently, an issue involving arbitration clauses made its way to the Supreme Court dealing with whether employers could compel employees to undergo individual arbitration and forgo class-action suits. In the Epic Systems case, in a 5-4 decision, the Supreme Court “found that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA). Furthermore, according to the Court, class and collective actions do not constitute “protected concerted activities” under the National Labor Relations Act (NLRA), because the NLRA at its core is intended to address organizational and collective bargaining rights and “does not mention class or collective action procedures or even hint at a clear and manifest wish to displace the Arbitration Act.”’4)Alan S. Kaplinsky, et al., Supreme Court Hands Employers “Epic” Win in Class Action Waivers Dispute, National Law Review (May 22, 2018), https://www.natlawreview.com/article/supreme-court-hands-employers-epic-win-class-action-waivers-dispute. The Court found that section 7 of the NLRA “focuses on the right to “organize and bargain collectively” and it does not address (1) arbitration, (2) the right to bring class or collective actions; or (3) overriding the FAA.”5)Lauren S. Novak, Supreme Court OKs Class Action Waivers in Employment Arbitration Agreements, National Law Review (May 22, 2018), https://www.natlawreview.com/article/supreme-court-oks-class-action-waivers-employment-arbitration-agreements. Because of this ruling, “the NLRB can no longer attempt to interfere in pending matters by ruling that the agreements are invalid.”6)Lauren S. Novak, Supreme Court OKs Class Action Waivers in Employment Arbitration Agreements, National Law Review (May 22, 2018), https://www.natlawreview.com/article/supreme-court-oks-class-action-waivers-employment-arbitration-agreements. This decision was not met with universal praise, however, as Justice Ginsburg dissented to the majority opinion and argued that “the majority’s decision will result in a “huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”’7)Kaplinsky, supra note 4.

Ultimately, while arbitration provisions tend to give employers an edge in dealing with any dispute an employee brings forward against their employer, the Supreme Court’s recent ruling illustrates the increased deference and power employers have over their employment agreements. This ruling will likely signal a revision of many employment agreements to include a provision to compel individual arbitration and waive their rights to join class-action suits and thus deprive employees of one of their most potent weapons against employers. Whether this ruling will be limited or altered in the future remains to be seen. However, if you have agreed to such a provision and believe it is unenforceable for some other reason, you should immediately seek legal counsel to discuss your possible courses of action.

References   [ + ]

1. Signing an Arbitration Agreement With Your Employer, NOLO, https://www.nolo.com/legal-encyclopedia/signing-arbitration-agreement-with-employer-30005.html (last visited Dec. 28, 2017).
2, 3. Signing an Arbitration Agreement With Your Employer, NOLO, https://www.nolo.com/legal-encyclopedia/signing-arbitration-agreement-with-employer-30005.html (last visited Dec. 28, 2017).
4. Alan S. Kaplinsky, et al., Supreme Court Hands Employers “Epic” Win in Class Action Waivers Dispute, National Law Review (May 22, 2018), https://www.natlawreview.com/article/supreme-court-hands-employers-epic-win-class-action-waivers-dispute.
5, 6. Lauren S. Novak, Supreme Court OKs Class Action Waivers in Employment Arbitration Agreements, National Law Review (May 22, 2018), https://www.natlawreview.com/article/supreme-court-oks-class-action-waivers-employment-arbitration-agreements.
7. Kaplinsky, supra note 4.
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