Supreme Court Enforces Employment Arbitration Agreement Waivers of Class Actions

The Court in EPIC SYSTEMS CORP. v. LEWIS predictably split 5-4 with conservative justices enforcing the class waivers and progressive justices dissenting. 

Russ Bleemer writes:

The long-running controversy involves arbitration provisions that kick in due to class waivers which prohibit employees from joining class processes—litigation or arbitration—in favor of mandatory, predispute, individualized arbitration to resolve disputes with their employers.

...

[Justice] Gorsuch’s [majority] opinion rejects a 2012 National Labor Relations Board administrative [decision] that held that FAA Sec. 2 removed mandatory individual arbitration from FAA application for employee agreements.  The Court’s opinion notes that the reasoning interfered with a fundamental attribute of arbitration.

After rejecting the Sec. 2 argument, Gorsuch dismantled the employees’ other arguments.  He develops the Supreme Court precedent concerning two clashing federal statutes, finding that the National Labor Relations Act, passed in 1935, didn’t override 1925’s FAA to require class or collective actions.

Supreme Court to Decide Enforceability of Class Waivers in Labor Arbitration

Federal appeals courts have split on whether the NLRB rightly holds arbitration agreements illegal under federal labor law if they contain class action waivers.

The Supreme Court today agreed to resolve the issue.

Circuit Split on Employment Class Waivers

The Seventh Circuit refused to enforce an arbitration agreement’s prohibition on class actions, which would have required the employee to individually arbitrate his wage and hour claim. The Seventh Circuit said the agreement’s prohibition on class actions violated the employee’s right to engage in concerted activity under the National Labor Relations Act.

In so ruling the Seventh Circuit joined the National Labor Relations Board but split from the Fifth Circuit.

Eleventh Circuit Enforces Class Waiver Clauses in Employment Arbitration Agreements

NLRB v. Courts

Class Action Waivers

While the NLRB says such clauses are unenforceable, courts disagree--including the now the Eleventh Circuit in Walthour v. Chipio Windshield Repair, LLC, 2014 WL 1099286 (11th Cir., March 21, 2014),

The NLRB v. The Courts: Class Actions v. Arbitration

The NLRB holds for class actions

The National Labor Relations Board holds that individual employment agreements may not prevent employees from engaging in protected concerted activity in both union and nonunion environments.

The Board ruled in D.R. Horton that individual, as opposed to collectively bargained, arbitration agreements that are a condition of employment, may not bar collective action through both arbitral and judicial forums.

In contrast, most courts enforce arbitration agreements that foreclose class actions.

See for example, the Fifth Circuit.

This article "The NLRB v. The Courts: Showdown Over the Right to Collective Action in Workplace Disputes" by Boston College Professors Stephanie M. Greene & Christine Neylon O'Brien sides with the NLRB’s interpretation.   American Business Law Journal, Vol. 51, No. 4, 2014

Precluding Class Actions

Homebuilder D.R. Horton's employment arbitration agreement precludes classwide arbitration.  The National Labor Relations Board found that this violated labor law.  The Fifth Circuit disagreed with the NLRB in reliance on the Federal Arbitration Act.

D.R. Horton, Inc. v. Nat’l Labor Relations Bd., __ F.3d __, 2013 WL 6231617 (5th Cir. Dec. 4, 2013).

Marty Heller says of the Fifth Circuit's decision it "very quietly overturned the NLRB" and "this decision provides an interesting conversation starter regarding the active (perhaps overactive) NLRB."