One of the most important employment law Supreme Court decisions in years has come down recently in the landmark case, Epic Systems Corp. v. Lewis 584 U. S. ____ (2018). A sharply divided Court held that employers may require employees, as a condition of employment, to enter into arbitration agreements that contain class action or collective action waivers.
The questions that led to the decision was, whether class waivers violate the National Labor Relations Act ("NLRA") and whether such agreements are fully enforceable. Certain exceptions apply, but for the most part the decision removes the last potential legal barrier to the enforcement of class waivers in employment contracts, holding that such waivers do not violate the NLRA and are, thus, enforceable.
Certain exceptions apply, but for the most part the decision removes the last potential legal barrier to the enforcement of class waivers in employment contracts. In California, for instance, state legislation permitting private attorney general actions such as California's Private Attorneys General Act ("PAGA") is one of the few exceptions to the Epic rule.
What is most important for employers is that those who maintain mandatory arbitration programs with class waivers can be assured for the time being that those waivers provide a valid defense to a collective or class action. Best practice for employers who do not already require their employees to agree to arbitration programs would be to at least consider whether an arbitration program with a class waiver is appropriate for them.
For California employers, though, they must understand that employees who have entered into class waivers may still bring PAGA actions in the state. Also, state and federal agency-initiated actions are not barred, leaving the Department of Labor and the California Department of Labor Standards Enforcement (DLSE) are free to pursue actions on behalf of a class of employees regardless of whether those employees have entered into class waivers. Finally, employers should also be aware that they may still be hit with numerous, simultaneous single-claimant arbitration claims against an employer at the same time, which might cost an employer more than defending a collective or class action in court.
While arbitration agreements, containing class waivers, may not be necessary for all employers, this decision will more than likely result in more employers adopting arbitration programs with class waivers, and likely will reduce the number of class and collective actions employers face.