On May 21, 2018, in a 5-4 decision, the U.S. Supreme Court ruled that employers may include arbitration clauses with class action and collective action waivers in employment agreements, and that such waivers are enforceable. By allowing employment agreements to limit employees’ rights to file a class action lawsuit against their employer, this decision is favorable to employers.
The Supreme Court’s decision in Epic Systems Corp. v. Lewis
In Epic Systems Corp. v. Lewis, the Supreme Court was asked to decide whether there was a conflict between the National Labor Relations Act (the “NLRA”) and the Federal Arbitration Act (the “FAA”) that would render class action waivers in employment arbitration agreements unenforceable. Writing for the majority, the Supreme Court’s newest Justice, Neil Gorsuch, held that there was no conflict between the two Acts. The Court held that Section 7 of the NLRA, which guarantees employees the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection,” did not confer a right on employees to pursue class or collective actions.
In the conclusion, Justice Gorsuch observed that “[t]he policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”
Implications for employers
After the Supreme Court’s decision, employees may only challenge the enforceability of arbitration provisions and class action waivers on limited state law grounds. An enforceable class action waiver means that employees must submit their employment-related claims to one-on-one arbitration, without the advantage of class action procedures supplied by court rules, or the collective action procedures provided for under the Fair Labor Standards Act.
Employers should consult with legal counsel regarding the benefits of adding a class action waiver to the arbitration provisions of their standard Employment Agreements. In making this determination, employers should consider whether an arbitration clause, or a jury trial waiver, is more advantageous.
In addition, now is also a great time to revise and update Employment Agreements given the Florida Supreme Court’s recent guidance on non-competition agreements.
Should you need assistance with drafting or revising an Employment Agreement, please contact Gunster’s labor & employment practice group.
