Today, the U.S. Supreme Court cleared one of the final obstacles to class action waivers in arbitration agreements, casting aside what was likely the last major challenge to the popular provisions. Employers who do not use class action waivers would be well-served to reconsider that decision.
In Epic Systems Corp. v. Lewis, the Supreme Court held that the National Labor Relations Act (NLRA) did not prevent enforcement of arbitration agreements with class action waivers. That specific 5-4 holding was not terribly surprising given the number of 5-4 decisions issued in recent years upholding arbitration agreements, but the opinion signaled a potentially seismic shift in the law under the NLRA.
In 2011, the Supreme Court took the world of employment law by surprise by holding that class action waivers in arbitration agreements were enforceable. Since then, class action lawyers have tried a number of legal challenges to attempt to invalidate their use. This challenge under the NLRA was one of the last remaining.
This case presented the court with the issue of whether a class action proceeding was a right guaranteed by Section 7 of the NLRA, which confers the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The five justices in the majority found class action waivers enforceable despite those so-called Section 7 rights. Although the NLRA speaks very specifically to certain aspects of collective bargaining, like picketing and strikes for example, the statute makes no mention of class action cases and, in fact, class actions barely existed in 1935 when the NLRA was enacted by Congress. The Supreme Court found those indicators, among others, to win the day for arbitration advocates.
What About The PAGA?
For California employers, this decision, while helpful, will not stem the flood of representative wage-hour cases under the Private Attorneys General Act of 2004, which California courts have exempted from the class action waiver rule. At least for now. We expect the Supreme Court to clarify the contours of the class action waiver rule in future cases and PAGA cases may well be the next in line.
A Narrowing Of Section 7 Rights?
The decision did suggest that the Supreme Court has Section 7 rights squarely in its crosshairs. The National Labor Relations Board, which enforces the NLRA, issued a series of decisions during the Obama Administration invalidating common employer policies on social media and workplace civility, among other things. In this decision, the Supreme Court advanced a view that Section 7 rights were limited to “the right to organize unions and bargain collectively” – a major departure from the broad view of the Obama Board.
For now, however, employers who do not require employees to sign arbitration agreements with class action waivers should consider doing so. They have proven to be a valuable tool to guard against the costs imposed by defending class-action cases.