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U.S. Supreme Court Upholds Enforceability of Arbitration Agreements in which Employees Agree to Arbitrate Individual Claims Against an Employer

On May 21, 2018, the U.S. Supreme Court held that arbitration agreements in which employees agree to arbitrate their claims against an employer on an individual basis, rather than on a class or collective basis, are enforceable and do not violate the National Labor Relations Act (“NLRA”).  Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018) The Court reasoned that through the Federal Arbitration Act (“FAA”), Congress “instructed federal courts to enforce arbitration agreements according to their terms – including terms providing for individualized proceedings” and that the NLRA did not conflict with this principle. 

In light of the decision, employers will need to reevaluate their own employment agreements and assess whether: (1) they need to revise the language of their arbitration agreements if they already include class and/or collective action waivers, or (2) to include a class and/or collection action waiver in their arbitration agreements if not already included.  Whether the changes will apply to current employees or just new hires will also need to be taken into consideration, along with the scope of the claims to include in arbitration agreements.  For employers currently facing class and/or collective actions, the decision may mean being able to compel individual arbitrations if the employees agreed to forego class and/or collective actions in their arbitration agreements. 

Critics of the Court’s opinion are concerned over the impact it may have on workers, a potential uptick in workplace violations and the inability to vindicate employees’ rights.  Further, it remains to be seen whether Congress will work to enact new legislation which would effectively reverse the Court’s decision.  However, as it stands now, the decision will have an effect on multiple jurisdictions which have enacted laws that prohibit employers from mandating arbitration of certain claims.  Given the decision, state laws prohibiting arbitration of certain claims may be subject to challenge.

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