News & Resources

Supreme Court of the United States Holds that Class Action Waivers in Employment Arbitration Agreements are Permissible

Jun 01, 2018
Twitter Facebook  Google+
Register to attend our June 14 Rise & Learn session to learn more about this topic

The Supreme Court of the United States recently issued a decision upholding employers’ right to include class action waivers in arbitration agreements. This decision, which resolved a split in the lower appellate courts and reversed rulings from the National Labor Relations Board (NLRB), has been widely viewed as pro-employer. By allowing employers to utilize class action waivers, employers are better able to shield themselves from potentially costly multi-plaintiff litigation brought by employees who have banded together as a class.

Before being deemed impermissible by the NLRB in 2013, class action waivers were often included in arbitration agreements signed by employees as a condition of either commencing or continuing employment with their employer. If an employee who signed an arbitration agreement with a class action waiver sought to bring a claim against his or her employer, the employee was required to pursue the claim through the arbitration process, and had to do so individually, rather than collectively with other employees who had similar claims. As a result, employees lost the benefit of banding together as a collective force and pooling their resources to pursue claims that may have otherwise been prohibitively expensive to maintain individually.

In a 5-4 decision authored by President Donald Trump’s appointee, Justice Neil Gorsuch, the Supreme Court held that the National Labor Relations Act does not prohibit class action waivers. Justice Ginsburg wrote a dissenting opinion, in which she harshly criticized the majority opinion as “egregiously wrong” for dismissing the potential harm towards workers’ rights. She stated, “The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts — including the provisions requiring employees to litigate wages and hours claims only one-by-one.”

Justice Ginsburg’s concern, along with many plaintiffs’ lawyers and civil rights advocates, is that the Court’s decision will allow employers to violate employees’ rights, essentially without consequence, because of the chilling effect of bringing a claim individually, rather than collectively. Attorneys are likely to refuse to accept cases where, for example, only a few hundred dollars of unpaid wages are in dispute, and employees are likely to be more wary of retaliation resulting from bringing individual claims against their employer.

In light of this new direction provided by the Supreme Court, employers should seek counsel to determine if they may benefit from requiring employees to sign arbitration agreements, or if they already have such agreements in place, whether they should include class action waivers.

If you would like more information on how to effectively use arbitration agreements that include a class action waiver provision, please attend our Rise & Learn session, Have Your Policies Been Trumped?, on June 14, 2018, or feel free to contact Amanda Smith, Julie Trout, Katie Basch or the K|W|W attorney you usually work with.