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U.S. Supreme Court Upholds Enforceability of Class Action Waivers

On May 21, 2018, the U.S. Supreme Court held that the inclusion of class and collective action waiver provisions in arbitration agreements given to workers as a condition of employment are valid and enforceable.  Prior to this holding, the enforceability of arbitration agreements that included such waivers remained uncertain due to a split among the Federal Courts of Appeal.  Specifically, the Appellate Courts for the Sixth, Seventh and Ninth Circuits held that arbitration agreements containing these provisions that restrict employees’ rights to pursue class and collective actions violate the National Labor Relations Act (“NLRA”) while the Second, Fifth and Eighth Circuits held that such provisions were enforceable as written pursuant to the Federal Arbitration Act (“FAA”).  In the consolidated cases of Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and National Labor Relations Board v. Murphy Oil USA, Inc., the U.S. Supreme Court finally resolved this split and rejected the argument that there was a conflict between the FAA and NLRA.   

Writing for the majority in a 5-4 decision, Justice Neil Gorsuch reasoned that Congress, through the FAA, mandated the enforcement of arbitration agreements, instructing “federal courts to enforce arbitration agreements according to their terms – including terms providing for individualized proceedings.”  The Court first observed that the FAA manifested a “liberal federal policy favoring arbitration,” and required courts to enforce not only parties’ agreements to arbitrate, but the parties’ chosen arbitration procedures.  Further, the Court held that nothing in the NRLA suggested otherwise and it did not appear that Congress intended to displace the FAA.

Justice Ruth Bader Ginsburg, writing for the dissent, stated that the majority paid “scant heed” to the precedent established by the National Labor Relations Board that “the NLRA safeguards employees from employer interference when they pursue joint, collective, and class suits related to the terms and conditions of their employment.”  Justice Ginsberg went on to argue that the decision will result in the “underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”  In response to the dissent, the majority accused the dissent of retreating “to policy arguments.”

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