SCOTUS Upholds Class Action Waivers in Arbitration Agreements

June 28, 2018

In Epic Systems Corp. v. Lewis, the U.S. Supreme Court reaffirmed that employers subject to the Federal Arbitration Act (“FAA”) can require employees to arbitrate their disputes individually and waive the right to pursue claims through a class or collective action. The decision has significant implications because class action waivers allow employers to block workers from banding together in alleging workplace violations, such as wage and hour violations. Moreover, these waivers allow employers to circumvent litigation in the courtroom, generally reducing legal fees and time spent resolving employment disputes.

In answering whether class action waivers are valid, the Supreme Court addressed the apparent conflict between the FAA, which provides that an agreement to arbitrate “shall be valid, irrevocable, and enforceable,” and the National Labor Relations Act (“NLRA”), which gives employees the right to work together for “mutual aid or protection.” The Court explained that the issue turned on whether the NLRA’s provision trumps the FAA’s requirement that courts enforce arbitration agreements.

Granting a huge victory for employers, the Court found that the NLRA’s reference to employees’ right to engage in concerted activity for “mutual aid or protection” focuses on unions and collective bargaining, not on arbitration or class action procedures. Thus, the Court held that absent fraud, duress, or other contractual defenses, employers’ arbitration agreements requiring employees to waive class or collective claims are valid and enforceable.

If employers have not already done so, they should therefore consider implementing an arbitration agreement or updating existing arbitration agreements to specifically include a class action waiver in order to circumvent litigation and block class-wide claims.