A federal court has upheld businesses’ ability to have employees sign agreements that require them to pursue disputes with the company individually through arbitration. The National Labor Relations Board (NLRB) found that these mandatory arbitration agreements violated employees’ rights to collectively challenge company practices through a class action. The Fifth Circuit disagreed and overturned the NLRB. Now, employees who have signed these agreements can still arbitrate individually or pursue unfair labor practice claims through the NLRB; but the decision is an important step toward curbing the increasing number of employee class action lawsuits.

While other courts could rule differently, this case offers businesses some assurance that their arbitration agreements precluding class actions will be upheld. Such agreements can be a valuable tool for companies in providing predictability and controlling costs in employment-related disputes.