U.S. Supreme Court Declares Class Action Arbitration Waivers Enforceable

In a 5-4 decision on May 21, the Supreme Court of the United States ruled that arbitration agreements providing for individualized proceeding are enforceable and do not violate either the Federal Arbitration Act (“FAA”) or the National Labor Relations Act (“NLRA”).

In Epic v. Systems Corp. v. Lewis, 584 U.S. ____ (2018), the Court considered a trio of cases in which employees signed arbitration agreements that required employment-related claims to be resolved through individual arbitrations and waived their ability to pursue class or collective litigation.  In each of these cases, the employees sought to litigate wage and hour claims under the Fair Labor Standards Act (“FLSA”) and related state law claims.

The employees argued that the class action waivers were unenforceable under the FAA’s savings clause and that these agreements violated Section 7 of the NLRA by restricting an employee’s ability to engage in protected concerted activity.  The Court rejected the employee’s argument and stated, while the policy may be debatable, “the law is clear” that the FAA expressly requires courts to enforce the terms of arbitration agreements as written, including terms that call for individualized proceedings.

The Court explained that while the FAA savings clause allows courts to invalidate arbitration agreement “upon such grounds as exist at law or in equity for the revocation of any contract,” such as fraud, duress, unconscionability, it was inapplicable to this case.  Additionally, the Court turned to congressional intent to provide guidance on this issue and ultimately found that Congress did not manifest a clear intent for the NLRA to displace the FAA.

The Supreme Court’s ruling is a favorable outcome for employers who wish to require employees to resolve disputes individually through arbitration.  Importantly, this decision does not prevent an individual from filing a discrimination charge with the EEOC or related state agency or limit an employer from participating in a suit filled by such administrative agency, including the Department of Labor.


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