May 23, 2018 | Category: Arbitration, Employment, News, NLRA, NLRB

On May 21, 2018 the United States Supreme Court ruled that class action waivers in employment arbitration agreements do not violate the National Labor Relations Act (NLRA). The 5-to-4 decision upholds a long held practice, which allowed businesses to stop employees from banding together to file claims for work-related issues. In recent years the National Labor Relations Board (NLRB) had sought to invalidate the practice saying that class action waivers violate the NLRA.

Following this decision, employers should feel secure in incorporating and enforcing mandatory class action waivers, compelling arbitration.

The Supreme Court’s Decision

In Epic Systems Corp. v. Lewis, the Court ruled that the right to bring a joint, collective, representative, or class-based claim is not considered a concerted action under the NLRA; therefore, the NLRA would not bar an agreement requiring arbitration instead of any such claims. Justice Neil Gorsuch, writing for the majority, stated that neither the Federal Arbitration Act (FAA), which instructs federal courts to enforce arbitration agreements according to their terms, nor the NLRA, which secures employees rights to organize unions and bargain collectively, made class action waivers in arbitration agreements unlawful. While the NLRA states that contracts that are in conflict with the policy of protecting workers’ “concerted activities for the purpose of collective bargaining or other mutual aid or protection” are unenforceable, this does not conflict with Congress’s directions favoring arbitration.

This issue came to the Supreme Court in three separate cases, which were consolidated to address conflicting rulings by the lower Circuit Courts of Appeal. Epic Systems Corp. v. Lewis involved a wage and hour collective action alleging that Epic Systems violated the FLSA by misclassifying technical writers as exempt. The 7th Circuit Court of Appeals denied Epic Systems’ motion to compel arbitration. NLRB v. Murphy Oil USA Inc. involved a collective action alleging violations of the FLSA. The 5th Circuit Court of Appeals granted Murphy Oil’s motion to dismiss the collective action and compel arbitration. Ernst & Young, LLP v. Morris involved a collective action alleging that Ernst & Young violated the FLSA and California labor laws by misclassifying employees to deny them overtime. The 9th Circuit Court of Appeals held that Ernst & Young violated the NLRA by requiring employees to sign an arbitration agreement.

The Supreme Court took up the question to provide a resolution to the issue once and for all.

In a passionate dissenting opinion, Justice Ruth Bader Ginsburg called on Congress to act to correct the Court’s decision. Ginsburg argues that the Court’s decision ignores the consequences of diminishing the right of employees to band together in confronting their employer. There is no indication that Congress intends to take action based on this decision.

Some Background on How We Got Here

The FAA (1925) and the NLRA (1935) each are instrumental in the relationship between employers and employees. The FAA encourages private resolution of disputes through arbitration. The NLRA protects employees who engage in concerted activities for mutual aid or protection in the workplace. The two have peacefully coexisted for years — until 2012.

In 2012 the NLRB ruled that an employer violated Section 7 of the NLRA by requiring employees to sign arbitration agreements waiving the right to pursue class and collective action claims. It was the NLRB’s belief that “the collective pursuit of workplace grievances through litigation or arbitration is conduct protected by Section 7.” This decision was ultimately overturned by the 5th Circuit Court of Appeals in 2013. However, the issue was brought to the forefront again by the cases referenced above.

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