In a 5-4 decision in Epic Systems Corp. v. Lewis, the US Supreme Court issued its long-awaited decision on the validity of class action waivers in employment arbitration agreements, holding that such waivers are valid and must be enforced as written.
In reaching this conclusion, the Court rejected the position that class action waivers are invalid because they violate an employee’s right to engage in protected concerted activity under the National Labor Relations Act (NLRA). The core highlights of the Supreme Court’s decision are as follows:
- The Federal Arbitration Act (FAA) favors the enforcement of employment agreements, and courts are required to enforce terms of employment agreements under the FAA.
- Although the FAA has a savings clause allowing courts to invalidate employment agreements “upon such grounds as exist at law or in equity for the revocation of any contract,” this applies only to contract defenses such as “fraud, duress or unconscionability.”
- Congress never intended for the NLRA to override the FAA. Moreover, class actions are not the type of concerted activities protected by Section 7 of the NLRA. Instead, the NLRA focuses on the right to organize and bargain collectively. It does not address the matters of arbitration or the right to bring class or collective actions.
- The National Labor Relations Board’s (NLRB’s) contrary view was not entitled to deference because it involved interpretation of the FAA, which falls outside the NLRB’s statutory authority.
To learn more about the advantages and risks associated with adopting arbitration agreements that include class action waivers, please contact your Ally Law lawyer.