Are Class Action Waivers Enforceable?

We’ll just have to wait (a bit longer) and see. On February 8, the U.S. Supreme Court stated it will not resolve this hotly-contested issue until at least the fall. 

The Supreme Court granted petitions for certiorari in three lawsuits challenging the legality of arbitration agreements that bar workers from pursuing class actions. The Court consolidated the cases, Murphy Oil USA Inc., Epic Systems Corp. and Ernst & Young LLP for oral argument because they all share the same central issue on appeal: whether arbitration agreements that prohibit employees from pursuing work-related claims as a group violate the National Labor Relations Act (NLRA). 

Many employers use class action waivers to reduce both legal exposure and expense. If enforceable, class action waivers can keep disputes with employees in arbitration and out of court. Whether such constraints on class action litigation are legal has been and remains a hotly contested issue, with the National Labor Relations Board ruling in numerous cases that class action waivers are unenforceable. 

In Murphy Oil USA Inc., the Fifth Circuit Court of Appeals overturned the labor board’s invalidation of the company’s arbitration agreements. Subsequent Seventh and Ninth Circuit Courts of Appeal decisions sided against the Fifth Circuit, and against the employers, creating a split. In Epic Systems Corp., the Seventh Circuit held that class waivers in arbitration agreements violated workers’ rights to engage in concerted action under federal labor law and so were unenforceable. In Ernst & Young LLP, the Ninth Circuit held that a collective and class waiver in a contract between the health care software company and its employees violated the NLRA’s prohibitions on employers barring workers from engaging in collective activities.

The Supreme Court stated that it will not hear argument on the cases until the 2017 term, which begins in October. We will continue to monitor these important issues as they develop.

 

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