Review Your Employment Agreements Now!
Last week, the Supreme Court issued its ruling in the most important business case this term, Epic Systems Corp. v. Lewis, deciding in favor of employers using individual arbitration agreements with class-action waivers in their employment contracts. The decision is a huge win for the many employers who already use individual arbitration agreements with class-action waivers, and for those employers who do not, the decision is a clear signal that they can now limit their liability for employment-related claims if they change their employment contracts accordingly.
The Supreme Court agreed to hear arguments on the issue after a circuit split at the Court of Appeals level. The issue involved a National Labor Relations Board interpretation from 2012 that individual arbitration agreements using class-action waivers, otherwise enforceable under the Federal Arbitration Act, violated the National Labor Relations Act (NLRA). The Supreme Court held that individual arbitration agreements are enforceable as written under the Federal Arbitration Act and that the NLRA does not displace the Federal Arbitration Act to provide employees with a right to class action. Justice Ruth Bader Ginsburg, in dissent, predicts this decision will result in the underenforcement of federal and state employment and labor statutes, and employees will be less likely to pursue small-value claims on an individual basis. Other critics have observed that this decision will make it more difficult for employees to redress sexual harassment in the workplace, an important concern following the zeitgeist of the #MeToo movement. Regardless of the critiques, the Supreme Court says the law is clear, and only a policy debate in Congress, if ever taken up, might change the law down the road.
For the foreseeable future, employers can limit their liability for employment-related claims by including an individual arbitration provision with a class-action waiver in their employment contracts. This can help employers reduce their expected liability for employment claims because arbitration is less likely to result in “windfall” damage awards, arbitration is quicker and less expensive than traditional litigation, and arbitration decisions are generally non-appealable and do not create precedent for other cases against the employer.
Employers should immediately review their employment contracts to see if they include an individual arbitration agreement with a class-action waiver. If your employment contracts do not include this provision, contact your attorney to find out what you can do to limit your liability for employment-related claims through arbitration.