Supreme Court Approves Employers’ Use of Class Action Waivers

On May 21, 2018, the United States Supreme Court, in the case of Epic Sys. Corp. v Lewis, held in a 5-4 decision that employers can require – as a condition of employment – that employees waive their rights to participate in class action lawsuits.  Resolving a split among the various circuit courts, employers can now rely on arbitration provisions in employment contracts, handbooks and even potentially independent contractor agreements as being effective tools to preclude class claims against them, along with the negative publicity that may result from the filing of such claims.  Employees who are subject to such arbitration provisions must now bring their claims on an individual basis.

Justice Gorsuch wrote the majority opinion in a case decided along familiar ideological lines. “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise,” the opinion said. The class waiver issue has been shrouded in uncertainty since the National Labor Relations Board issued its 2012 decision in a case involving home builder D.R. Horton.

In a lengthy dissent, Justice Ruth Bader Ginsburg called the majority’s decision “egregiously wrong,” and expressed concern that the “inevitable result” of the decision “will be the under enforcement of federal and state statutes designed to advance the well-being of vulnerable workers,” particularly those with claims of wage violations against their employers. Justice Ginsburg also expressed concern that the majority’s holding will cause many small claims employees may have, particularly for minimum-wage and overtime violations, to essentially fall through the cracks, and that many employers may be emboldened to disregard wage and hour laws.

The Court’s decision is a big win for employers, and it brings an end to the years of uncertainty created when the NLRB first challenged arbitration agreements.  All employers should now evaluate their use of class action waivers to ensure that they can take advantage of this critical decision.

Click here to read to the Decision.