On 21 May 2018, in a split 5-4 decision, the United States Supreme Court upheld workplace arbitration agreements that prohibit class and collective actions. The closely watched decision in Epic Systems Corp. v. Lewis actually involved three cases the Court consolidated for review. In short, the Court held that these arbitration agreements do not violate the National Labor Relations Act (NLRA) and, instead, must be enforced as written. This important victory means that employers are free to implement mandatory arbitration agreement that preclude class and collective actions.
The employers and employees in these cases had entered into contracts that specified individualized arbitration proceedings would be used to resolve employment disputes. Despite this, the employees sought to litigate their claims under the Fair Labor Standards Act (FLSA) and state wage-hour laws as collective and class actions.
The Federal Arbitration Act (FAA) generally requires courts to enforce arbitration agreements as written, and the employees’ agreements clearly precluded class claims. The employees argued that the FAA’s “saving clause” says that arbitration agreements need not be enforced if they violate some other federal law and that requiring individualized proceedings violated the NLRA.
The Court provided several reasons why the employees’ claims failed:
- The FAA requires courts to “rigorously” enforce arbitration agreements according to their terms
- The NLRA does not override the FAA
- While an administrative agency’s interpretation of a statute it administers may be entitled to deference, the National Labor Relations Board’s (NLRB) view that the NLRA prohibits these agreements is not
For more information about implementing mandatory arbitration agreements in your workplace, please contact your Ally Law labor and employment lawyer.