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Employers’ Use of Class Action Waivers in Arbitration Agreements Upheld (June 2018)

What Happened?  In a recently issued decision, Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444 (U.S. May 21, 2018), the United States Supreme Court held that employers may continue to include class and collective action waivers in mandatory arbitration agreements signed by their employees.

Previously, in D.R. Horton, Inc., 357 NLRB 2277 (2012), the National Labor Relations Board (“Board”) found that mandatory arbitration agreements that included waivers of class or collective actions unlawfully restricted employees’ rights under Section 7 of the National Labor Relations Act (“NLRA”). Following the Board’s decision, a split among the courts of appeals emerged. While the Second, Fifth and Eighth Circuits rejected the Board’s reasoning in D.R. Horton, the Seventh and Ninth Circuits sided with the Board.

In resolving this spilt, the Supreme Court agreed with the Second, Fifth and Eighth Circuits, finding that the NLRA does not prohibit the use of class and collective action waivers in such arbitration agreements. Initially, the Court noted that the Federal Arbitration Act (“FAA”) established “a liberal federal policy favoring arbitration agreements[,]” including agreements “providing for individualized proceedings.” The Court held that there was no “clear and manifest” congressional intent that the NLRA should displace the FAA. 

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