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Supreme Court to Review Validity of Class Action Waivers in Employment Arbitration Agreements

By Samia M. Kirmani, Jeffrey Schwartz, Collin O’Connor Udell and David E. Nagle
  • January 13, 2017

The U.S. Supreme Court has agreed to decide whether class action waivers in employment arbitration agreements violate the National Labor Relations Act (“NLRA”). The Supreme Court’s action promises the much-anticipated resolution of the circuit split on the issue.

The Court on January 13, 2017, granted certiorari in National Labor Relations Board v. Murphy Oil USA (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young LLP v. Morris (No. 16-300), consolidating them for oral argument.

Background

Arbitration agreements that require employees to pursue claims in arbitration, rather than in court, have long been enforced pursuant to the Federal Arbitration Act (“FAA”). Due to a series of Supreme Court decisions, employers increasingly have included class and collective action waivers in such agreements. However, the National Labor Relations Board (“NLRB”) has taken the position that employers violate the NLRA when they make such waivers in arbitration agreements a condition of employment.

Disagreeing with the NLRB, in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), and Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), the U.S. Court of Appeals for the Fifth Circuit generally held class and collective action waivers do not violate the NLRA. Since then, the Second and Eighth Circuits have followed the Fifth Circuit and enforced arbitration agreements requiring employees to submit their employment claims to individual arbitration. (For more on D.R. Horton, see our article, Employer’s Mandatory Arbitration Clause Waiving Employee’s Right to Sue in Court Upheld.)

On May 26, 2016, the Seventh Circuit created a circuit split. In Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), the Seventh Circuit held arbitration agreements that prohibit employees from bringing or participating in class or collective actions violate the NLRA. More recently, in Morris v. Ernst & Young, No. 13-16599, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016), the Ninth Circuit agreed with the Seventh Circuit and the NLRB. (For more on these decisions, see our articles, Supreme Court Review Likely After Seventh Circuit Creates Split on Class and Collective Action Waivers under NLRA and Holding Class Waivers Violate the NLRA, Ninth Circuit Joins Circuit Split.)

In September 2016, the employers in Epic Systems Corp. and Ernst & Young and the NLRB in Murphy Oil each petitioned the Supreme Court to decide the issue once and for all. Reflecting the uncertainty on the issue, cases presenting this same question currently are before several other courts of appeals.

Analysis of Supreme Court’s Action

Given the issue’s importance and the requests by both employers and the NLRB to have the Supreme Court decide the issue, it is unsurprising that the Court granted certiorari and consolidated these cases. In the past, critical Supreme Court’s decisions regarding class action waivers (albeit outside the employment context) were decided by 5-4 and 5-3 votes and were authored by the late-Justice Antonin Scalia. By the time the Court decides the issue, Justice Scalia’s replacement likely will be on the Court.

The petitioners’ merits briefs likely will be due within 45 days of the Court’s grant of certiorari, the respondents’ briefs likely will be due 30 days after the petitioners’ briefs are filed, and reply briefs likely will be due 30 days thereafter. Still, the briefing schedule may be slowed, as many amicus briefs are anticipated.

Until the Supreme Court decides the matter one way or another, employers with such waivers will continue to face an uncertain landscape. We will keep you informed on the issue. Meanwhile, please contact a Jackson Lewis attorney with questions about drafting or enforcing arbitration agreements.

©2017 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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