Employers won a victory at the United States Supreme Court today, when the Court ruled 5-4 in Epic Systems Corporation v. Lewis that class action waivers in mandatory arbitration agreements do not violate the National Labor Relations Act (“NLRA”). Several Courts of Appeal, including the Ninth Circuit, had held that Section VII of the NLRA, which protects employees’ right to undertake “concerted activities” for “mutual aid or protection,” forbade enforcement of class action waivers. Justice Gorsuch, writing for the majority, reasoned that this since interpretation of the NLRA would partially repeal the Federal Arbitration Act, it should be rejected in the absence of a clear expression of Congress’s intent to do so.
Federal courts in California and Nevada previously were bound by the federal Ninth Circuit’s decision in Morris v. Ernst & Young, LLP that the NLRA prohibited class action waivers, while both the California (in Iskanian v. CLS Transp. Los Angeles, LLC) and Nevada (in Tallman v. Eighth Judicial Dist. Court ) state Supreme Courts had rejected that argument. Now state and federal courts in both states will enforce class action waivers in arbitration agreements. While the Iskanian rule that California employees may not waive their right to bring a representative action with other workers under California’s Private Attorneys General Act (“PAGA”) still stands, Epic Systems strengthens the deterrent against class action claims that a well-drafted arbitration agreement with a class action waiver creates. In other words, California employers cannot use a class action waiver in a mandatory arbitration agreement to prevent PAGA claims, which are similar to a wage and hour class action case. However, having a class action waiver in an arbitration agreement at least prevents a combined class action case with a PAGA case and is therefore generally still beneficial to California employers. Nevada does not have a law similar to California’s PAGA, so a class action waiver for Nevada employers is generally considered extremely beneficial to the employer.
Employers who want to take advantage of the increased certainty the Epic Systems ruling provides have a number of options to consider, including opt-out provisions and procedural safeguards to ensure that their agreements steer clear of the limited ways courts may still invalidate arbitration agreements. This new ruling and other issues regarding arbitration and class action waivers will be discussed in SHLC’s Mid-Year Employment Law Update Webinars for California and Nevada Employers. To sign up for these webinars, please visit: www.suttonhague.com/events.