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U.S. Supreme Court: Employers May Require Employees to Arbitrate their Claims Individually and Waive Their Rights to Class Actions

Employers just gained a huge victory from the United States Supreme Court regarding the arbitration of employment-related claims. On May 21, 2018, in a narrow 5-4 decision, the Court held that employers may include a clause in their employment contracts that requires employees to arbitrate their disputes individually, and to waive their rights to pursue class action lawsuits against their employers.

In Epic Systems Corp. v. Lewis, the Court consolidated three cases involving alleged wage-and-hour violations that groups of employees sought to litigate through class actions or collective actions in federal court. In each case, employees had signed employment agreements that contained arbitration clauses, but argued that by requiring individual arbitrations of their claims, these clauses violated the National Labor Relations Act (NLRA), which gives them the right to engage in concerted activities "for the purpose of collective bargaining or other mutual aid or protection." The question before the Supreme Court: May employers require employees to waive their right to class or collective actions?

The answer: yes. As the Court's newest appointee, Justice Neil Gorsuch, wrote in the majority opinion, "As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear. In the Federal Arbitration Act (FAA), Congress has instructed federal courts to enforce arbitration agreements according to their terms--including terms providing for individualized proceedings." The Court concluded that the NLRA did not supersede the FAA's mandate that arbitration agreements be enforced.

Interested in Requiring Your Employees to Arbitrate Their Individual Claims and Waive Their Class Action Rights?

More than half of the nation's private employers use arbitration clauses, according to the Economic Policy Institute, and more than half of non-union employees in the private sector are subject to such agreements. It is estimated that with this new decision, even more employers will implement mandatory arbitration agreements with class action waivers.

If you are interested in implementing an arbitration agreement requiring your employees to arbitrate their individual claims and waive their class action rights,or updating your current agreement, or if you just have questions as to whether an arbitration agreement is right for your workplace, the experienced attorneys at Duggan Law Corporation are available to help you, which includes tailoring an arbitration agreement to fit your needs.

On a final note, California employers should keep an eye on proposed legislation that would ban mandatory arbitration agreements as a condition of employment. Under Assembly Bill 3080, employers would not be able to require employees to sign arbitration clauses or nondisclosure agreements regarding sexual harassment. Sponsor Assemblywoman Lorena Gonzalez Fletcher told the Sacramento Bee that requiring employees to "sign away their rights" can nullify protections against harassment, discrimination and wage-and-hour violations. We will keep you posted on developments regarding AB 3080.

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