Appellate Court Split Sets Stage for Supreme Court to Determine Use of Class Action Waivers in Employment Arbitration Agreements

As previously reported in EmployNews, the National Labor Relations Board has issued numerous recent decisions finding that employers’ use of class and collective action waiver provisions in mandatory arbitration agreements violates employees’ concerted activity rights under the NLRA. These waivers require that employees pursue claims against their employers through individual arbitration, and not as part of a group.

Many employers that use mandatory arbitration agreements decided not to change their terms until federal appellate courts accepted or rejected the NLRB’s position. Within the past several weeks, two appellate circuits issued differing opinions on this issue, setting the stage for the U.S. Supreme Court to provide the final word on the validity of such limits in arbitration agreements.

In Lewis v. Epic Systems, the Seventh Circuit Court of Appeals agreed with the NLRB, concluding that the NLRA’s Section 7 concerted activity rights impose special restrictions on employers not present with general commercial arbitration agreements. The next week, in Cellular Sales of Missouri, LLC v. National Labor Relations Board, the Eighth Circuit Court of Appeals took a contrary position, upholding the use of class and collective action waivers in the employment context. Previously, the Fifth Circuit Court of Appeals sided with employers, requiring mandatory arbitration on an individual basis.

The Supreme Court has historically rejected challenges to the use of mandatory arbitration agreements. In last year’s Imburgia decision, the Court upheld the use of a class action waiver in a commercial contract, even in situations where the amount of each claim made individual arbitration impractical. If the Court reviews the NLRB decisions, it will address the question of whether the NLRA prevents application of the Federal Arbitration Act’s wide preference for arbitration agreements.