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U.S. Supreme Court Upholds Class Action Waivers as Enforceable

On May 21, 2018, the United States Supreme Court, in a 5-4 decision in Epic Systems Corp. v. Lewis, held that arbitration agreements containing class action waivers are enforceable and do not violate the National Labor Relations Act (NLRA).

This decision resolved three separate cases before the Court that all involved plaintiff-employees who had pursued class action litigation against employer-defendants despite having previously entered into agreements to arbitrate such disputes on an individual basis:

  • In the first case, the U.S. District Court for the Western District of Wisconsin denied the employer-defendant’s motion to dismiss and to compel individual arbitration in a case involving alleged violations of the Fair Labor Standards Act (FLSA).  The Seventh Circuit affirmed this decision.
  • In the second case, the U.S. District Court for the Northern District of California granted the defendant-employer’s motion to dismiss and to compel individual arbitration in a similar case alleging violations of the FLSA.  However, the Ninth Circuit reversed the lower court’s ruling.
  • In the third case, the Fifth Circuit partially granted a defendant-employer’s petition for review of an order by the National Labor Relations Board (NLRB) that it had illegally forced employees to waive their rights to pursue class action lawsuits by signing arbitration agreements as a condition of employment.

The Supreme Court held that, in all three cases, the defendant-employer could enforce the class action waiver and compel individual arbitration. The majority opinion, written by Justice Gorsuch, held that “the [Federal] Arbitration Act requires courts ‘rigorously’ to ‘enforce arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which that arbitration will be conducted.’” (emphasis in original). The majority opinion also held that the Federal Arbitration Act’s savings clause did not apply to the three cases before it because the plaintiff-employees did not argue that “their arbitration agreements were extracted, say, by an act of fraud or duress or in some other unconscionable way that would render any contract unenforceable.” (emphasis in original). The majority opinion also held that class action waivers do not violate provisions of the NLRA that guarantee rights for workers to engage in collective bargaining and other mutual aid because the NLRA’s express language “does not even hint at a wish to displace the Arbitration Act.”

The Court’s decision in Epic Systems is good news for employers that wish to avoid having employees pursue legal claims through court proceedings and class action litigation.

The attorneys at CCLB represent clients of all types and sizes in connection with various employment-related matters, including litigation and arbitration. For any questions, or if we can be of any assistance with such a matter, please contact us at (404) 262-6505 or sgrubman@cclblaw.com.