The U.S. Supreme Court has issued a highly anticipated decision on the issue of whether class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA).
The Supreme Court’s opinion in three consolidated cases (Epic Systems Corp. v. Lewis; Ernst & Young LLP. v. Morris; NLRB v. Murphy Oil) resolves a split among the circuit courts on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). The Ninth Circuit (which covers California and Arizona) and Seventh Circuit had ruled that class action waivers violate the NLRA, while the Second, Fifth and Eighth Circuits held that such provisions do not violate the NLRA.
In a 5-4 decision authored by Justice Neil Gorsuch, the Court held that neither the FAA nor the NLRA made arbitration agreements' class-action waivers unlawful.
In light of the Supreme Court’s opinion, employers can continue to utilize arbitration agreements as a condition of employment. However, the California Supreme Court has held that employees may still bring “representative actions” under the Private Attorneys General Act, which can expose employers to substantial penalties and attorneys’ fees for violating specified Labor Code violations.
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