Court Reinstates Validity of Job Pacts Requiring Individual Arbitration


By Donn C. Meindertsma

The U.S. Supreme Court yesterday weighed in on an issue that has divided the lower courts in recent years. The Court framed the issue as follows:

Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?

The Court answered the first question yes; the second, no.

Over the last 30 or so years, the Court has consistently affirmed the rights of private parties to enter into agreements to arbitrate disputes as an alternative to litigation. The Court likewise has emphasized the obligation courts have under the Federal Arbitration Act to respect and enforce arbitration agreements. Yesterday's Court decision in Epic Systems Corp. v. Lewis and two similar cases continues that trend.

The employees in the cases before the Court brought collective actions against their employers for alleged violations of the Fair Labor Standards Act. The employers moved to compel individual arbitrations in lieu of the collective lawsuits on the ground that the employees had signed promises to arbitrate. In opposition, the employees argued that the federal National Labor Relations Act (NLRA) gave them a clear right to pursue class actions in court because, under the NLRA, employers may not interfere with the right of workers to engage in concerted, protected activities, and collective lawsuits are exactly that.

The Court rejected the workers' argument. The Court reasoned that the NLRA gives employees the right to engage in concerted work-related activities--bargaining and the like; but it does not give the employees a right to sue their employers as a class. The Court also observed that the cases before it did not even involve the NLRA; rather, the employers were alleging wage and hour violations. In short, the NLRA's protected activities provision did not trump the Federal Arbitration Act.

The Court's decision yesterday clears the way for an employer to use agreements that require an employee to arbitrate, individually, any disputes he or she may have with the employer. While arbitration is often considered a less costly, more efficient way to resolve workplace disputes, employers interested in using mandatory arbitration agreements are always advised to carefully consider the pros and cons of mandatory arbitration agreements.

Putting aside the issue whether arbitration pacts are enforceable, Epic may also narrow the scope of protected "concerted activity" under the NLRA. Note the following passage in the majority opinion:

The employees direct our attention to the [NLRA] term 'other concerted activities for the purpose of . . . other mutual aid or protection.' This catchall term, they say, can be read to include class and collective legal actions. But the term appears at the end of a detailed list of activities speaking of 'self-organization,' 'form[ing], join[ing], or assist[ing] labor organizations,' and 'bargain[ing] collectively.' And where, as here, a more general term follows more specific terms in a list, the general term is usually understood to 'embrace only objects similar in nature to those objects enumerated by the preceding specific words.' All of which suggests that the term 'other concerted activities' should, like the terms that precede it, serve to protect things employees 'just do' for themselves in the course of exercising their right to free association in the workplace (emphasis added).

Arguably, under Epic, "things" employees "do" that are not a typical way of expressing the right to free association in the workplace can no longer be considered protected under the NLRA. Joining a nationwide political protest, filing a lawsuit claiming violations of wage and hour laws, and other activities extraneous to "the workplace"--activities that in the past have been deemed protected by the NLRA--may no longer qualify as protected conduct.

Note: This alert should not be construed as legal advice and its receipt does not create an attorney-client relationship.