On January 13, 2017, the U.S. Supreme Court announced it will review three cases to determine whether class action waivers in arbitration agreements are lawful. It was thought the issue would be decided by June 30, 2017.
On Wednesday, the U.S. Supreme Court told lawyers from the three cases that it would not hear said cases until the 2017 term. The 2017 term begins in October, not June, so the impact of the announcement is that by October, President Trump’s Supreme Court nominee Judge Neil Gorsuch may be confirmed, and, if so, the Court may have restored the 5-4 conservative balance. Judge Gorsuch may very well provide the fifth vote employers have been hoping for.
Employers’ arbitration agreements sometimes require that employees waive a class action in resolving employment disputes. This means that if the employee signs the arbitration agreement containing a valid waiver, the employee may proceed to individual arbitration in lieu of a class action trial in the courts. Unless each employee proceeds to arbitration individually, individual arbitration, as opposed to class actions, tends to be a more confidential and more cost-effective alternative for the employer.
In California, the current state of the law under Iskanian v. CLS Transportation Los Angeles, LLC , 49 Cal.4th 348 ( 2014), is that class action waivers are enforceable. However, the 9th U.S. Circuit Court of Appeals decided in Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016), that a concerted action waiver violates the National Labor Relations Act and cannot be enforced. Morris, along with the 5th U.S. Circuit Court of Appeals’ decision in Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013 (5th Circ. 2015), finding an arbitration agreement enforceable, and the 7th U.S. Circuit Court of Appeals’ decision in Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), finding that concerted activities are unenforceable, are the three cases to be heard by the Supreme Court in October.
Should employers implement arbitration agreements with class action waivers? The decision should be carefully reviewed with a knowledgeable employment lawyer.