Supreme Court to Consider Whether Class Action Waivers Are Enforceable in Employment Disputes

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.

The case before the Supreme Court involves three cases, NLRB v. Murphy Oil USA from the Fifth Circuit, Epic Systems Corp. v. Lewis from the Seventh Circuit, and Ernst & Young LLP v. Morris from the Ninth Circuit. The Fifth Circuit ruled in 2013 that class action waivers in employment contract arbitration clauses do not violate § 7 of the NLRA, which protects workers’ right to engage in “concerted activities.” 29 U.S.C. § 157. The Seventh and Ninth Circuits, however, reached the opposite conclusion in 2016, ruling that a class action is a concerted activity protected by the NLRA.

The Supreme Court has upheld class action waivers in other cases. For example, it held that the FAA preempted a state court ruling invalidating a waiver in a consumer contract. DIRECTV, Inc. v. Imburgia, 577 U.S. ___ (2015). It also ruled that the FAA preempts state laws invalidating such waivers. AT&T Mobility v. Concepcion, 563 U.S. 333 (2011). The current case, which the court will probably hear in October, addresses a conflict between the FAA and another federal statute.

If you need to discuss an employment law matter with an attorney in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at (646) 867-7997.

More Blog Posts:

New Jersey Appellate Court Invalidates Arbitration Clause in Employee Handbook, The New Jersey Employment Law Firm Blog, April 1, 2016

New Jersey Appellate Court Rules on Enforceability of Employee Arbitration Agreements, The New Jersey Employment Law Firm Blog, October 27, 2015

A Resnick Law Group Victory: Last Minute Arbitration Will Not Be Upheld in New Jersey, The New Jersey Employment Law Firm Blog, April 5, 2012

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