Gorsuch-Led Court Upholds Class Action Waivers

May 31, 2018

After several months of deliberation, the Supreme Court ruled in a 5-4 decision authored by Justice Gorsuch that employment agreements can lawfully include provisions that require employees to arbitrate claims on an individual basis rather than through a class or collective actions. This is a significant victory for employers who may be the targets of costly wage and hour litigation that could otherwise be expanded to include hundreds, if not thousands, of their employees.

In, Epic Systems v. Lewis, a group of employees sued their employers alleging that they had failed to pay proper wages in violation of the FLSA. The FLSA expressly permits wage claims to be filed as collective actions, and so these employees chose to file their wage claims on behalf of large groups of employees aggrieved by the employers’ alleged wage practices, rather than individually. The employers, on the other hand, sought to force the employees to arbitrate the FLSA claims on an individual basis pursuant to the terms of the class action waivers in the arbitration provisions of their employment contracts. The employees challenged the employers, arguing that the class action waiver violated the Federal Arbitration Act and/or the National Labor Relations Act. The Supreme Court rejected the employees’ arguments and ruled that arbitration agreements that require an employee to arbitrate claims on an individual basis rather than as a collective or class are lawful and enforceable.

Employers who already have arbitration agreements including class action waivers in place should be confident in their ability to enforce those agreements, barring any contractual defenses such as lack of consideration, fraud, or duress. Now that the Supreme Court has definitively answered the question of whether such provisions are enforceable, employers should strongly consider putting such agreements in place if they have not already done so.

The Court’s decision may not necessarily end the debate over class action waivers. Ruth Bader Ginsburg prepared a scathing dissent claiming that the decision hurt “vulnerable workers” requiring them to “go it alone” in seeking “redress for common experienced wage loss.” To the extent Democrats retake Congress, there is always the possibility that they could amend the laws to include language prohibiting class action waivers. So, keep watching!