Supreme Court Upholds Enforceability Of Individualized Arbitration Agreements In Employment Contracts

Employers sometimes require their employees to enter into employment contracts requiring employment disputes between the parties to be resolved through individualized arbitration proceedings.  Such agreements include a waiver of the employee’s right to participate in class action employment lawsuits.  Until recently, the enforceability of individualized arbitration agreements was questionable following a controversial ruling by the National Labor Relations Board in 2012.

However, the United States Supreme Court recently issued a significant decision confirming that individualized arbitration agreements in employment contracts are enforceable.  On May 21, 2018, the Supreme Court published its opinion in the Epic Systems Corp. v. Lewis action.  In Epic Systems Corp., multiple employees signed individualized arbitration agreements but sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court.

The employees argued that the individualized arbitration agreements they signed violated the National Labor Relations Act (NLRA).  The Supreme Court noted that “[t]he NLRA secures to em­ployees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”  The Court therefore determined that the NLRA does not grant employees an absolute right to resolve their grievances via class actions.

The Epic Systems Corp. decision is significant in that it allows employers to protect themselves from potential class action litigation under certain circumstances.  It is important that employers seeking such protection review their employment contracts and policies to ensure they are taking advantage of the holding in Epic Systems Corp.

For more information regarding the Epic Systems Corp. decision or any other employment law issues, contact Rich Reese in LGC’s San Diego office.