Collective & Class Actions

It’s all over the internet, so it must be true!  Indeed, this time it is…on May 21, 2018, the U.S. Supreme Court held in Epic Systems Corp. v. Lewisthat employers may have arbitration clauses in employment contracts that prohibit class or collective actions (and it does not violate the National Labor Relations Act). Long story short, Epic Systems Corp. was a trio of consolidated cases, in which the employee in each case sought to litigate an employment dispute through a class or collective action in federal court. However, the employees had signed a contract providing for individual arbitration proceedings in the event of an employment dispute. In all three cases, the lower court or NLRB ruled in favor of the employees, holding that the individual agreements violated the employee’s right to concerted activities protected under the NLRA. The Supreme Court reversed the lower court decisions finding, “Congress has instructed that arbitration agreements like those before us must be enforced as written.” The Supreme Court decision in Epic Systems Corp reverts to the pre-2012 almost unanimous court and NLRB decisions upholding the legality of similar arbitration agreements. Accordingly, as long as the employee has consented to individuated proceedings for employment disputes, the employer may enforce such an agreement.

That being said…should employers do so? As with most things employment law, it depends on the employer and its specific facts and situation. For example, many employers may prefer to defend an alleged common wage violation in one litigation, versus multiple individual arbitration hearings. Further, arbitration is not necessarily going to save money because the employer typically must pay for the arbitrator(s) (unlike a judge). Thus, just because you can, doesn’t necessarily mean you should.