Do you have an arbitration clause in your employment contract?
For some time, businesses have included arbitration clauses in their legal documents, which have stated that employment disputes would be resolved through arbitration. Companies can benefit from using arbitration to resolve disputes because it spares the expense of costly lawsuits.
According to the National Law Review, during the past six years, an ongoing legal battle has ensued to determine the legality of waiving arbitration agreements to allow class action lawsuits. The National Labor Relations Board (NLRB) had a policy of declaring arbitration agreements that included class action waivers as unlawful.
Various federal appeals courts had ruled on the issue with opposite findings, some holding that class action waivers were lawful and others deferring to the NLRB’s policy on the matter, that they were unlawful.
What Was the Recent Supreme Court’s Ruling on the Arbitration with Class Action Waivers?
As the highest level of appeal in the nation, the U.S. Supreme Court has the final say. Even so, the justices were split on the issue with a standing of 5 to 4.
On May 21, 2018 the U.S. Supreme Court ruled that valid arbitration agreements must be enforced.
On What Basis Did the Supreme Court Arrive at Its Decision?
The Arbitration Act states that an arbitration agreement may only be invalidated “by generally applicable contract defenses, such as fraud, duress or unconscionability.”
In the case before the Supreme Court, employees did not assert that an act of fraud, duress or some other unconscionable factor should render the arbitration contract unenforceable. They objected because they were required to have individual arbitration proceedings instead being allowed a class or collective proceeding. The majority of justices ruled that their argument did not meet the terms of the Arbitration Act as sufficient to invalidate an arbitration agreement.
The majority also ruled that there is no conflict between the Arbitration Act and the National Labor Relations Act, which does not express approval or disapproval of arbitration and does not mention class or collective procedures at all. Therefore, the court found that the NLRB had overstepped its authority in its decisions that class or collective actions could waive arbitration agreements.
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If you face employment disputes, our attorneys at Stephen Hans & Associates are glad to offer seasoned legal guidance and representation to help you resolve employment issues.