As we briefly reported on here, the U.S. Supreme Court (“SCOTUS”) ruled Monday that arbitration agreements that force workers to sign away their rights to pursue class and representative action claims are legal, rejecting the National Labor Relations Board’s position that class waivers violate federal labor law.
In 1925, Congress passed the Federal Arbitration Act (“FAA”), which (among other things) provides that an agreement to arbitrate a dispute “shall be valid, irrevocable, and enforceable.” Ten years later, Congress enacted the National Labor Relations Act (“NLRA”), which makes clear that employees have the right to work together for “mutual aid and protection.” SCOTUS’ decision resolved a trio of cases involving Epic Systems Corp., Murphy Oil USA Inc., and Ernst & Young, LLP. In each case, an employee who signed an arbitration agreement with a class action waiver filed a lawsuit in federal court, seeking to bring both individual and collective claims and not arbitrate their individual claims as required by the arbitration agreement. The employers argued that, under the terms of the arbitration agreements, the employees needed to pursue their claims on an individual basis in arbitration.
Specifically, in Murphy Oil, an employee was required to sign an arbitration agreement with the company which contained a provision waiving the employee’s right to pursue work-related claims through a class or collective action in any forum. In 2010, the employee filed a class action lawsuit against the company in federal court, claiming the waiver violated the NLRA. The Fifth Circuit reaffirmed its position that class or collective action waivers in arbitration agreements did not violate the NLRA.
However, in a separate proceeding with Murphy Oil, the National Labor Relations Board (“NLRB”) ruled that such waivers violated the NLRA. Despite several rejections by the Fifth Circuit, the NLRB has stood its ground over the past several years and repeatedly held that class waivers violate workers’ right to engage in concerted action (i.e. “mutual aid and protection”) under the NLRA. The Ninth Circuit (which includes California, Arizona, Nevada, Washington, and Oregon) agreed with the NLRB’s interpretation of the law.
Here, SCOTUS held that Congress instructed in the FAA that arbitration agreements must be enforced, and neither the FAA’s saving clause nor the NLRA suggests otherwise. The majority concluded that, although it “may be debatable” whether the result it reaches is a sound policy, “the law is clear.” Specifically, the SCOTUS majority opinion stated, “While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA — much less that it manifested a clear intention to displace the [FAA].”
COUNSEL TO MANAGEMENT:
This decision is a massive win for employers and finally provides certainty about the enforceability of class action waivers in arbitration agreements going forward. To make the victory even sweeter, the NLRB issued a statement in which they stated that they respect the SCOTUS’ decision and will expeditiously resolve the 55 pending cases with allegations that employers violated the NLRA by maintaining or enforcing individual arbitration agreements or policies containing class- and collective-action waivers in accordance with the new rule. Employers who may have been wary about implementing arbitration agreements with class action waivers prior to this ruling can now breathe easy and know that, if drafted properly, their arbitration agreements will be enforced.
With the ways in which the laws are stacked against employers, particularly for those in California, having arbitration agreements in place is critical to protecting employers from large, costly class action lawsuits. If you do not have an arbitration agreement, or are concerned about the adequacy of your existing arbitration agreement, please contact the experts at The Saqui Law Group who can assist you in making sure your company is properly protected.