May 25, 2018

Supreme Court Holds Class and Collective Action Waivers are Enforceable

In Epic Systems Corp. v. Lewis, a 5-4 decision authored by Justice Neil Gorsuch, the Court confronted a major dispute in labor and employment law. The Court resolved a circuit split through the review of three cases concerning mandatory individualized arbitration proceedings to resolve employment disputes. The Court held these class and collective action waivers to be enforceable in arbitration agreements.

Previously, it had been argued and held in two circuits that class and collective action waivers violated the National Labor Relations Act. These circuits argued that the waivers violated Section 7 of the Act, which guarantees workers’ rights to bargain collectively and to engage in other concerted activities for the purpose of mutual aid or protection.

In deciding Epic Systems, the Supreme Court clarifies that class and collective action waivers do not violate the National Labor Relations Act. The Court highlights the fact that the Act speaks to the rights of employees to exercise their free association in the workplace, not of their rights to class litigation in the courtroom.

This decision will likely have far-reaching impacts outside the arena of traditional labor law. One currently significant implication of this decision is its effect on the “Me Too” movement. This decision makes it clear that employees with mandatory arbitration agreements seeking to litigate claims of sexual harassment in the workplace will have to do so individually.

As may be apparent, this decision is widely considered a win for employers, as it is likely that this will lead to a reduction in costly and time-consuming litigation, particularly in regards to wage and hour disputes.

Employers are advised to take advantage of the ability to avoid class action liability as soon as possible by implementing appropriate waivers with respect to all new hires and current employees.