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Supreme Court Agrees to Consider Class Action Waivers in Arbitration Agreements

Mandatory arbitration programs are, by now, prevalent in the workplace, in large part because employers assume that those programs can be used to combat class action litigation by requiring employees to arbitrate multiple, individual disputes instead of bringing a single class or collective action. Now, the Supreme Court has indicated that it will weigh in on whether that assumption is correct.

Despite the Supreme Court having upheld the enforceability of class action waivers in arbitration agreements, the National Labor Relations Board has aggressively opposed such practices, and challenged their use through litigation. Specifically, the Board has taken the position that the use of a class waiver is an unfair labor practice because it interferes with employees’ right to engage in concerted activity under Section 7 of the National Labor Relations Act. Likewise, class and collective action plaintiffs have relied on the NLRB’s position to contest the validity of class waivers in otherwise applicable arbitration agreements. This litigation has produced a significant split among the federal courts of appeal. This split put the Second, Fifth, and Eighth Circuit Courts of Appeal on the side upholding such waivers against the Seventh and Ninth Circuits. This type of split makes the case ripe for consideration by the Supreme Court and, on January 13, 2017, the Court agreed to hear the issue, granting cert in three cases and consolidating them for consideration.

The incoming administration could impact resolution of this issue in several ways. There may be a new Justice on the Court when the case is heard. In addition, a newly constituted Board and new Solicitor General may have a different view of the issue than was held under President Obama. However, two of these cases are private lawsuits to which the Board is not a party. Thus, regardless of the position taken by the administration, the issue will continue to be raised by individuals who oppose arbitration until the Court decides the matter. However, it now appears that we will soon have a resolution of whether the class waivers that are the hallmarks of many arbitration programs are, indeed, enforceable.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.