In a long awaited landmark ruling, the Supreme Court ruled 5-4 that under the Federal Arbitration Act (“Arbitration Act”) arbitration agreements requiring individualized proceedings, barring the ability of an employee to bring or participate in a class action, must be enforced and neither the Arbitration Act’s saving clause nor the National Labor Relations Act (“NLRA”) suggest otherwise.
The Court said that the employees were mistaken in claiming that the NLRA overrides the Arbitration Act and renders a class action waiver unlawful. The NLRA secures to employees the right to organize unions and bargain collectively, but says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. According to the Court, “[t]he policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”
Arbitration agreements that include a class action waiver are a valuable tool to insulate your company from the potential liability of a class action lawsuit. The Supreme Court has now clearly and unequivocally approved their use. As such we strongly recommend that all businesses either consider using arbitration agreements, or review their existing arbitration agreements to ensure they include enforceable class action waivers to protect your company.
It is important to remember that while the Supreme Court has approved of arbitration agreements and class action waivers, the agreements must still be fair and not one sided, otherwise courts can still find them unconscionable and not enforce them.
Thus, make sure your arbitration agreements provide for a full and fair hearing that allows the employee to pursue the same remedies in arbitration that he or she could recover in court. Also, make sure the cost for the employee to arbitrate would not exceed what a lawsuit in court would cost the employee.
Finally, remember that in California, the current state of the law allows an exception for representative PAGA claims, such that an employee may still pursue a PAGA case in court. However, in light of this recent U.S. Supreme Court decision, we believe that we will see new attempts to force PAGA cases into individualized arbitrations. Stay tuned!
For more information about this decision, please contact RPNA at 818-992-9999 or via email.