U.S. Supreme Court to Decide Circuit Split: Are Class Action Waivers in Employment Arbitration Agreements Enforceable?

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On Friday, the United States Supreme Court granted three petitions for certiorari to determine a quickly developing circuit split. The question before the Court is whether the National Labor Relations Board is correct in its interpretation that class action waiver provisions in certain employment arbitration agreements are illegal under federal labor law. Since 2011, when the U.S. Supreme Court permitted such waivers in AT&T Mobility LLC v. Concepcion, employers have relied upon them to require that disputes be resolved through individual arbitration. The NLRB over the past few years has issued numerous decisions invalidating arbitration agreements because they contained class and collection action waivers. The NLRB has stood its ground and routinely stated that such waivers violate employees’ rights under the National Labor Relations Act and are unenforceable.

The U.S. Supreme Court has agreed to hear three cases. Each involves the question whether the NLRA prohibits employers from requiring the non-management employees covered by the NLRA (employees not defined as “supervisors”) to arbitrate their work-related claims individually rather than as a class. The three cases come from the Fifth, Seventh, and Ninth Circuits.

The Fifth Circuit, in Murphy Oil USA, Inc.v. NLRB, overturned the NLRB’s decision that Murphy Oil had unlawfully required employees at its Alabama facility to sign an arbitration agreement waiving their right to pursue class and collective actions. The Fifth Circuit held that the pro-arbitration policy of the Federal Arbitration Act overrides federal labor law interests and requires enforcement of the class waivers. On the other side of the circuit split, the Seventh and Ninth Circuits have held that corporations cannot require employees to give up their rights to pursue work-related claims on a class-wide basis. The U.S. Supreme Court will review Lewis v. Epic Systems Corp., a case in which the Seventh Circuit held that an arbitration agreement precluding collective arbitration or collective actions violates federal labor law and is unenforceable under the Federal Arbitration Act. The Court will also hear Morris v. Ernst & Young, a decision from the Ninth Circuit invalidating Ernst & Young’s mandatory arbitration agreement because it required employees to bring all claims in arbitration and limited such claims to those brought on an individual basis. These decisions put the Seventh and Ninth Circuit squarely at odds with the Second, Fifth, Eighth, and Eleventh Circuit, with more yet to weigh in.

The Fourth Circuit has not addressed this issue yet, although it has held that the availability of class arbitration under the terms of the arbitration agreement is a question for the Court, not the arbitrator, to decide, as we discussed last March. North Carolina courts have not addressed the NLRA waiver issue, nor are they likely to have the opportunity, although the Court of Appeals did follow the U.S. Supreme Court in holding that contractual waivers of class proceedings in arbitration agreements are permitted in North Carolina.

Stay tuned for further developments from the U.S. Supreme Court.

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About Amanda Pickens

Amanda Pickens focuses on complex business disputes and employment law. She has experience enforcing and defending noncompetition and trade secrets disputes and representing employers before administrative agencies such as the Equal Employment Opportunity Commission.