Arbitration Class Action Waiver

The Supreme Court’s opinion is found in Epic Systems Corp. v. Lewis , 584 U.S. ___ (May 21, 2018) No. 16-285. Previously, two federal circuit courts of appeal held that class action waivers in employment arbitration agreements violate an employee’s right to collectively bargain and engage in concerted activities provided by the National Labor Relations Act of 1935. A different federal circuit court of appeal held that class action waivers in employment arbitration agreements are permissible under the United States Arbitration Act of 1925. The Supreme Court agreed to hear the three cases to resolve the conflict in decisions among the federal circuit courts.

The Supreme Court held that the plain language of the United States Arbitration Act, which states that arbitration agreements must be enforced as written, manifests the intention and instructions from Congress. Justice Gorsuch delivered the opinion of the Court and stated that though the policy may be debatable, the law is clear. Justice Ginsburg dissented and stated that the majority’s opinion would inhibit an employee’s ability to seek redress for small wage claims that are too expensive and burdensome to litigate. Justice Ginsburg called upon Congress to pass legislation that would eliminate or obviate class action waivers in employment arbitration agreements.

Many California legislators seem to share the same belief as Justice Ginsburg. In October 2015, the California legislature passed AB 465 which would have prohibited arbitration agreements in the employment context. Governor Brown vetoed AB 465 stating that he was not ready to sign a blanket prohibition of arbitration agreements in the employment context and that the legislature should pass targeted legislation aimed to remedying specific issues presented by mandatory arbitration of employment claims.

On February 16, 2018, Assembly Member Gonzalez-Fletcher introduced AB 3080, which would ban mandatory arbitration agreements in the employment context. Assembly Member Gonzalez-Fletcher has connected her bill to the #MeToo movement and claims that employers use arbitration as a means to silence employees who have been the subjects of sexual harassment and discrimination as well as wage theft and related disputes. AB 3080 is currently being discussed in the Appropriations Committee. Our office is tracking the progress of this bill.

Even though the Supreme Court has held that employers may have class action waivers in arbitration agreements, an arbitration agreement with a class action waiver must still be an enforceable contract under California law.

We recommend that all employers contact us to review their employee arbitration agreements and discuss the value of including a class action waiver. Please contact Kurtis Urien at Kurtis@mrjclaw.com for assistance with employee arbitration agreements.

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