The U.S. Supreme Court granted certiorari to three consolidated cases addressing the enforceability of class action and collective action waivers in employment arbitration agreements. Many employment agreements include provisions stating that both employees and employers will submit any employment-related dispute to a neutral arbitrator. A waiver bars employees from filing or joining a class action related to their employment. The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., appears to authorize this type of provision, but a waiver might violate the National Labor Relations Act, 29 U.S.C. § 151 et seq. The Supreme Court has recently upheld class action waivers in consumer contracts, and it may have agreed to hear this case in order to resolve any uncertainty resulting from those rulings.
In a class action, a plaintiff or group of plaintiffs sues on behalf of a larger group of similarly situated persons. This allows people who lack the resources to file suit, or whose individual claims are too small to justify the expense of suing, to pool their claims into a single lawsuit. Federal law establishes four criteria for certifying a class: (1) the class must be numerous enough to make individual lawsuits, or individual joinder of plaintiffs, impractical; (2) the class members must have common legal or factual questions; (3) the claims of the lead plaintiffs must be typical of the other class members; and (4) the lead plaintiffs must be able to “fairly and adequately” represent the class members and their interests. Fed. R. Civ. P. 23(a).
Arbitration is a method of alternative dispute resolution. Instead of filing suit, the parties submit their dispute to one or more arbitrators, who are usually legal professionals with knowledge of the subject matter at issue. The arbitrator will conduct a hearing, which might resemble a trial in many ways, and recommend an outcome. Employment contracts may require binding or non-binding arbitration. The results of binding arbitration are not subject to review by a court, absent evidence of misconduct by the arbitrator. A common criticism of arbitration is that the process tends to favor whomever is paying the arbitrator’s fees.