Employers Score Victory As U.S. Supreme Court Upholds Class-Action Waivers In Arbitration Agreements

In a major victory for employers, the United States Supreme Court held that class-action waivers in employment arbitration agreements are enforceable and not inconsistent with federal labor law.

In Epic Systems Corp. v. Lewis, the plaintiffs brought wage-and-hour class actions against their employers under the federal Fair Labor Standards Act. In connection with their employment, the plaintiffs had signed agreements requiring the arbitration of any disputes on an individual basis. The plaintiffs disregarded their arbitration agreements, however, and filed their lawsuits in federal court on a class-action basis. The plaintiffs argued that their arbitration agreement were unenforceable under Section 7 of the National Labor Relations Act (“NLRA”), which guarantees all employees (not just union-represented employees):

[T]he right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157 (emphasis added).

The plaintiffs argued that the catch-all phrase “other concerted activities” includes the right to pursue class and collective actions.

The Supreme Court rejected the plaintiffs’ argument and held that nothing in the NLRA provides employees with a right to pursue class or collective actions, and that, because the catch-all phrase “other concerted activities for the purpose of…other mutual aid or protection” appears at the end of a detailed list of activities, it should be understood only to protect the same kinds of things employees do while exercising their right to free association in the workplace, such as picketing and strikes.

The Supreme Court’s decision resolves a split among the federal circuit courts and reverses the controversial decision of the Obama-era National Labor Relations Board (NLRB) in 2012 (D.R. Horton) that led to the uncertainty of class-action waivers in the first place. Following the Supreme Court’s decision in Epic, the NLRB issued a news release stating that Epic “clearly establishes that arbitration agreements providing for individualized proceedings, and waiving the right to participate in class or collective actions, are lawful and enforceable.”

In delivering a win for employers regarding class-action waivers in employment arbitration agreements, the Supreme Court also has narrowed the concept of protected “concerted activities” under the NLRA. In recent years, the NLRB had been expanding the scope of concerted activities to protect a wide variety of employee conduct, such as communicating on social media. Time will tell how this decision will affect employees’ rights under the NLRA more broadly. But, in concert with recent changes at the NLRB and its new General Counsel, the employer-centric outlook appears favorable.

California employers should note, however, that the Supreme Court’s decision in Epic does not affect employees’ ability to pursue representative actions seeking civil penalties under the California Labor Code Private Attorneys General Act (PAGA). Arbitration agreements containing class-action waivers should still carve out PAGA representative actions.

Employers should review their arbitration agreements and consider modifying them to include class-action waivers if they are not already included. Employers whose arbitration agreements already contain class-action waivers also should review their agreements in light of Epic’s unequivocal support for such waivers and California’s restriction of waiving representative PAGA actions.

Contact your SFSS&W attorney if you have any questions or wish to revise your arbitration agreements, or for any other labor and employment law matters.

Millicent N. Sanchez ext. 8203 msanchez@swerdlowlaw.com
Janet I. Swerdlow ext. 8202 jswerdlow@swerdlowlaw.com
David A. Wimmer ext. 8201 dwimmer@swerdlowlaw.com
Emily G. Camastra ext. 8213 ecamastra@swerdlowlaw.com
Meghan E. O’Kane ext. 8204 mokane@swerdlowlaw.com
Lori M. Yankelevits ext. 8205 lyankelevits@swerdlowlaw.com
Karen E. Rhodes ext. 8206 krhodes@swerdlowlaw.com

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