This morning the United States Supreme Court issued its highly anticipated opinion in three consolidated cases pending before it on the issue of whether a class action waiver provision in an employment arbitration agreement violates the National Labor Relations Act (“NLRA”) and is therefore unenforceable. (NLRB v. Murphy Oil Co.; Epic Systems Corp. v Lewis; Ernst & Young LLP v. Morris.) There previously was a deep split among some of the federal circuit courts on this issue.
The Court held that class action waiver provisions in employment arbitration agreements do not violate employees’ rights under the NLRA to engage in collective, concerted activity for mutual aid and protection, and that these provisions remain enforceable under the Federal Arbitration Act (“FAA”). The Court’s decision reaffirms the important principles that employment arbitration agreements should be enforced according to their terms and that laws or judicial decisions which seek to interfere with arbitration are generally preempted by the FAA.
This is a significant win for employers. This ruling should provide businesses some comfort knowing they may continue to incorporate and enforce mandatory class action waivers in employment arbitration agreements. Although traditional contract defenses (such as procedural or substantive unconscionability) can still make employment arbitration agreements unenforceable, and state laws may provide for different standards (such as California), today’s decision should provide a level of comfort when it comes to drafting, enforcing and defending employment arbitration agreements.
For more information about this decision, contact Ron S. Brand of The Brand Law Firm.
(The Court’s full decision can be read here: https://www.supremecourt.gov/opinions/17pdf/16-285_q8l1.pdf)
This blog provides general information about legal issues. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.