Supreme Court Upholds Arbitration Class Action Waivers
It’s official. Class action waivers are enforceable in employment arbitration agreements. On Monday, May 21, 2018 the U.S. Supreme Court upheld the enforceability of the waivers in Epic Systems Corp. v. Lewis. The Court resolved a conflict between the National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA) as to which Act trumped the other. The Court found in favor of the FAA’s exemption power, once again thwarting other laws that attempt to restrict the ability of parties from agreeing to arbitrate claims. The National Labor Relations Board (NLRB) under President Obama’s administration had found class action waivers to violate employee’s NLRA Section 7 rights to engage in concerted activities to improve the terms and conditions of their employment. The NLRB had ruled that the NLRA exempted the FAA on this issue. The Court in Epic Systems rejected this ruling in a close 5-4 decision.
This is a victory for employers wishing to avoid class actions from employees. We encourage all employers who may be interested in entering such enforceable arbitration agreements to consider this path now. While this is a true victory, it will come as no surprise to California employers that there is California law that operates similar to a class, which cannot be waived in arbitration. Currently, employment arbitration agreements cannot restrict employees’ ability to bring Private Attorney General Act (PAGA) actions. PAGA actions are representative actions where an employee stands in the shoes of the California Labor Commissioner to seek penalties for Labor Code violations. These actions operate similar to a class action, however, the representative employees do not need to have a class certified, making them much easier to bring. They are lucrative for plaintiff’s lawyers, but not as advantageous for the actual aggrieved employees. Aggrieved employees (think PAGA class), must share 75% of any recovery with the state.