Supreme Court to Decide If Employee Arbitration Clauses Are Enforceable Nationwide

By | January 17, 2017

The U.S. Supreme Court on Friday agreed to consider whether companies can head off costly class action lawsuits by forcing employees to give up their right to pursue work-related legal claims in court as a group.

The justices took up appeals of three lower court rulings, including one involving global professional services giant Ernst & Young, that dealt with the legality of agreements signed by workers requiring them to arbitrate disputes with their employers individually rather bring class action lawsuits with their co-workers.

At stake in the consolidated case is the future of the so-called class-action waiver, which employers have increasingly required employees to sign as part of their arbitration agreements to guard against the rising tide of worker lawsuits seeking unpaid wages.

Many companies say that resolving workplace disputes through arbitration with individual employees is a speedy and cost-effective alternative to class action litigation that can result in large damages awards by juries and is harder for businesses to fight than cases brought by individual plaintiffs.

Nearly 40 percent of employers reported using such waivers in their employee arbitration agreements in 2015, up from 16 percent in 2012, according to a survey conducted by the law firm Carlton Fields Jorden Burt.

But workers have fought back against the practice, arguing that the cost of pursuing their cases individually in arbitration is prohibitively expensive. The prospect of winning a large damages award in a class action can be the only way for workers to find lawyers to take their cases, they contend.

Dozens of companies, including Bank of America Corp., Citigroup Inc. and Jack in the Box Inc., have faced challenges by employees trying to invalidate class action waivers.

Most courts that have considered these cases have upheld the waivers. But employers could no longer count on the waivers being enforced nationwide following a pair of appeals court rulings handed down in 2016.

The Chicago-based 7th U.S. Circuit Court of Appeals and the San Francisco-based 9th Circuit found that class-action waivers are prohibited by a law protecting workers’ rights to act together. Those rulings clashed with decisions by three other federal appeals courts that found the waivers must be enforced.

The Supreme Court will review the 9th Circuit’s decision involving Ernst & Young and the 7th Circuit’s ruling involving Epic Systems Corp. It will also consider the New Orleans-based 5th Circuit’s judgment enforcing Murphy Oil USA Inc.’s waiver, which was challenged by the National Labor Relations Board.

The cases are Epic Systems v. Lewis, 16-285; Ernst & Young v. Morris, 16-300; and NLRB v. Murphy Oil, 16-307; all at the U.S. Supreme Court.

(Reporting by Robert Iafolla; Editing by Will Dunham)

Latest Comments

  • January 17, 2017 at 8:41 am
    TrumPolarBear says:
    typo; the last sentence should have 'if' in place of 'of'. mea culpa. I have fat digits on my big paws.
  • January 17, 2017 at 8:39 am
    TrumPolarBear says:
    It seems the only group of employees or candidates for employment who favor class action suits over arbitration are 'marginally productive' employees, to be polite. Looking at... read more
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