The Sophisticated Employer Blog

Is an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act (NLRA)? 

This question caused a decisive split among federal circuit courts of appeal, resulted in the authorship of numerous articles and was a primary topic of webinars and seminars for over five years. On Monday, the Supreme Court gave us a long awaited answer: yes. 

Justice Neil Gorsuch, who delivered the majority opinion (joined by the four remaining conservative Justices), began by asking two telling questions: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?” Epic Systems Corp. v. Lewis, 584 U.S. ______ (2018). 

Justice Gorsuch did not mince words: “[a]s a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms – including terms providing for individualized proceedings.” Id. at *2. 

Of note, the Supreme Court addressed the alleged conflict between the NLRA and the Federal Arbitration Act (FAA) and explained that the NLRA secures employees’ rights to unionize and collectively bargain, but says “nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.” Id.   

This decision will have immediate implications for 55 pending cases before the National Labor Relations Board (NLRB) involving allegations that employers violated the NLRA by maintaining or enforcing individual arbitration agreements or policies including class- and collective-action waivers. 

Additionally, it provides an important tool for employers that have class-and collective-action waivers in their employment agreements or are looking to craft such waivers. If you haven’t, now is a good time to consider whether a mandatory individual arbitration agreement is right for your business. And remember: this decision does not prevent employees from challenging mandatory arbitration agreements on other grounds such as fraud, duress, or unconscionability.  

It’s always important to have legal counsel carefully review applicable agreements before implementation or enforcement.