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High Court to hear class-action waiver cases

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in Employment Law,Human Resources

For the last year, the U.S. Supreme Court—short-handed following the death of Justice Antonin Scalia and prone to indecisive 4-4 ties—has shied away from major employment law cases. That all changed on Jan. 13, when the court agreed to hear three cases addressing a perennial hot topic: Is it lawful to include class-action waivers in arbitration agreements?

It’s a timely question as more employers seek to resolve disputes relatively quickly and inexpensively through arbitration, even as employees’ lawyers increasingly chase the potentially huge damage awards that can result from class-action lawsuits.

The 5th, 7th and 9th circuit courts of appeal have reached different conclusions in recent years. The Supreme Court will attempt to resolve the split.

The disagreement boiled over in 2012 with the National Labor Relations Board’s decision in D.R. Horton. In that case, homebuilding company D.R. Horton required employees to sign an agreement waiving their right to file employment-related class-action lawsuits and instead individually bring all claims to an arbitrator. The NLRB determined that the agreement violated the National Labor Relations Act.  

The three cases come at the class-action waiver problem from different directions, but the Supreme Court decided to hear them together:

  • Epic Systems Corp. v. Lewis (7th Circuit) and Ernst & Young, et al. v. Morris (9th Circuit) upheld the NLRB’s position that prohibiting class-actions violates employees’ NLRA rights to engage in “concerted activity” to improve working conditions.
  • In NLRB v. Murphy Oil, the 5th Circuit ruled against the NLRB. It said if the parties sign an agreement waiving the right to file class-action lawsuits, then it’s valid regardless of what the NLRA allows.

Preliminary briefs are due to the Supreme Court in early March. A decision is expected by late June.

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