Supreme Court to Resolve Current Split of Authority Over Enforceability of Class Action Waivers Contained in Mandatory Arbitration Policies

by William R. Hayden

Many employers have implemented mandatory arbitration policies requiring that all employment related disputes be resolved through final and binding arbitration rather than in traditional court proceedings. Generally speaking, the advantages of arbitration over civil litigation include lower costs, greater efficiency and speed, and decisions rendered by knowledgeable professionals, rather than lay juries. 

In addition to these potential benefits, many employers have added class action waivers to their arbitration policies, in essence requiring that claims be brought on an individual basis only, and not as class or collective actions. Relying primarily on the Federal Arbitration Act (FAA), which mandates enforcement of arbitration agreements according to their terms, the U.S. Supreme Court has previously enforced such arbitration provisions containing class action waivers. See, for example, AT&T Mobility v. Concepcion. In the employment context, however, the National Labor Relations Board (NLRB) has taken the position that class action waivers violate workers’ Section 7 rights under the National Labor Relations Act (NLRA) to engage in protected concerted activity, and are therefore unenforceable. 

To date, this somewhat novel argument has been expressly rejected by three federal courts of appeals, i.e., the 5th, 2nd, and 8th Circuits, but expressly adopted by three other federal courts of appeals, i.e., the 7th, 9th, and 6th Circuits. The U.S. Supreme Court thus had little alternative but to step in and resolve this national split of authority. It did so by agreeing to hear three consolidated appeals, each presenting this same arguable conflict between the FAA and the NLRA. The NLRB is a party in only one of these three consolidated cases (NLRB v. Murphy Oil USA, Inc.) with private litigants advancing the NLRB’s novel argument in the other two cases (Ernst & Young LLP v. Morris and Epic Systems v. Lewis). Interestingly, after the change in Administrations, the U.S. Department of Justice (DOJ) switched sides and backed the employers’ position that class action waivers should be enforced in its arguments before the U.S. Supreme Court. Thus, the Supreme Court has the rather unusual situation of one federal agency (the DOJ) arguing directly against the position advanced by another federal agency (the NLRB). A decision is expected by early next year, which will undoubtedly have a profound effect on employee relations and future employment litigation in the United States.