June 7, 2018



Before The Bar is a weekly vlog series brought to you by our summer intern class and future lawyers. They will brief you on trending legal topics every Thursday.

This week, meet Nicoleta. She will be discussing employment contract class action waivers upheld in the Supreme Court.

Stay tuned for next week's vlog featuring Nick!

Here's the full blog post:

Employment Contract Class Action Waivers Upheld by Supreme Court
By: Nicoleta Christodoulou

The Supreme Court of the United States ruled recently that arbitration clauses waiving class
actions in employment contracts are enforceable. The case is Epic Systems v. Lewis.

Why should the employers care?

  • Because it allows them to hire employees without having to worry about cost-prohibitive litigation in court and, most importantly, having to defend against catastrophic collective actions in the event of a dispute.

What exactly did the Supreme Court say?

  • The Court’s opinion begins with a question: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?”
  • In a 5 to 4 decision, the Court held that employers may use arbitration clauses in employment agreements to prohibit employees from bringing class or collective actions. Justice Neil M. Gorsuch wrote the majority decision, which was arrived at upon reviewing the National Labor Relations Act and relevant precedent.

Arbitrations are used in employment contracts as an alternative to litigation to render a quick,
easy, and inexpensive result. Although the three consolidated cases involved claims of employers underpaying their workers. The key element of the employment contracts in those cases was that each employee was required to bring their case separately as opposed to one plaintiff including multiple co-workers into one collective action. The employees argued that the Federal Arbitration Act contradicted the National Labor Relations Act. However, neither authorizes the Court to declare the parties’ agreements unlawful.

The Supreme Court has heard many cases over the years attempting to reconcile conflicts between the Federal Arbitration Act and other federal employment statutes. The Federal Arbitration Act has a savings clause which gives courts the authorization to refuse to enforce arbitration agreements. However, claimants can only invoke the savings clause in generally applicable contract defenses, such as fraud, duress, or unconscionability.

Additionally, the National Labor Relation Act guarantees employees the right to organize unions and bargain collectively, but it does not touch on class or collective action procedures. Although the dissenting opinion argues policy, there are arguments on both sides for the policy; however, the law is settled for now: arbitration agreements in employment contracts that specifically waive collective actions must be enforced by the lower courts.

What should employers do?

  • Immediately update all employee handbooks so that they contain a
    provision that specifically waives collective actions.

Here is the case: https://www.supremecourt.gov/opinions/17pdf/16-285_q8l1.pdf

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