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Supreme Court Sets Oral Argument in Class Action Waiver Cases – What's At Stake?

We’ve repeatedly published on the developments in the Circuits and the Supreme Court regarding the enforceability of class and collective action waivers in arbitration clauses, including those in employers’ dispute resolution clauses.

Now that oral arguments have been scheduled for October 2, 2017—the first day of the upcoming term—for several consolidated cases where these issues have been raised, we are likely to get some final resolution to the conflict that has been brewing in the courts.

In the months since the Supreme Court agreed to review this issue and resolve the Circuit Split on the validity of class and collective action waivers in the employment context, there have been a couple of important developments. First, Justice Gorsuch has joined the court and many think that his vote could prove critical in what is likely to be a close decision. Second, the Department of Justice has reversed its earlier position (formulated under the Obama administration) and has taken the position in its brief that class and collective action waivers are valid and enforceable under the Federal Arbitration Act (“FAA”), because the FAA trumps any concerns about employees’ ability to engage in protected concerted activity under the National Labor Relations Act.

For companies with dispute resolution programs, a decision finding class and collective action waivers invalid could result in a fundamental shift in the way those companies handle disputes with their employees. After all, one of the primary benefits of an arbitration program is the requirement—included in many companies’ programs—that employees arbitrate on an individual basis. Employers faced with the prospect of expensive collective and class arbitrations would be looking at a much different landscape of relative benefits and pitfalls of litigation versus arbitration than currently exists (at least in the Fifth, Second, and Eight Circuits). In any event, companies with dispute resolution programs would do well to stay tuned and should be ready to review and potentially revise their dispute resolution programs.

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.