On May 21, 2018, the United States Supreme Court held that employers can require employees to participate in individual arbitration proceedings to resolve employment disputes rather than pursuing such claims as a class action. The decision involved the interplay between two relatively old federal laws: the 1925 Federal Arbitration Act (“FAA”) and the 1935 National Labor Relations Act (“NLRA”). The FAA allows parties to agree to privately resolve disputes through arbitration. It requires courts to enforce the terms of arbitration agreements that the parties select. The NLRA guarantees employees the right to self-organize, including to engage in Section 7 “concerted activities.” The question before the Court was whether the NLRA’s Section 7 provisions protect employees’ ability to proceed collectively against employers in class action litigation.
In Epic Systems Corp. v. Lewis, the Supreme Court, divided along ideological lines, held that arbitration agreements with class-action waivers must be enforced as written. This decision ends a federal circuit court split and overturns the National Labor Relations Board’s (“NLRB”) position that class and collective action waivers violate employees’ Section 7 rights. Responding to the NLRB’s position, the Court held that Section 7 guarantees employees the right to bargain collectively and organize unions, but it does not protect the right to engage in class or collective actions.
In light of the Epic decision, employers should consider whether to implement employment arbitration agreements, or modify existing ones, to include class action waivers. Arbitration can benefit employers in many ways:
- Claims may often be resolved more quickly than through judicial or administrative proceedings;
- Discovery is typically more circumscribed;
- Disputes that arise during arbitration can typically be resolved over the telephone with the arbitrator;
- There is no “unpredictable” jury trial;
- Arbitrations are private - there is less opportunity for publicity (positive or negative);
- Documents and awards are not filed publicly; and
- The employer has some control over selection of the fact finder.
However, there are potential drawbacks to arbitration that employers should also consider:
- The parties have no right (or a very limited right) of appeal;
- Arbitrators have a tendency to admit all evidence;
- Arbitrators are much less likely to entertain and grant dispositive motions; and
The employer is often required to pay all of the arbitrator’s fees and overall costs may not necessarily be less than traditional litigation.