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February 1st, 2017
employment
SUPREME COURT TO RULE ON LEGALITY OF ARBITRATION AGREEMENTS PRECLUDING COLLECTIVE PURSUIT OF CLAIMS BY EMPLOYEES

As anticipated in light of the split among the Circuits, the Supreme Court agreed to consider whether arbitration agreements in employment contracts may preclude collective pursuit of claims.  In a growing trend, employers have included what are effectively class action bans within employment arbitration agreements.  The collective action waivers protect employers from the high defense costs and substantial damages associated with collective claims, but arguably may run afoul of employee rights secured by the National Labor Relations Act (“NLRA”). 

The National Labor Relations Board (“NLRB”) has taken the position that collective action waivers in employment arbitration agreements are unenforceable.  However, the NLRB’s interpretation is arguably inconsistent with the Federal Arbitration Act, and the Circuits are divided as to whether the NLRA overrides the FAA. 

Before the Court hears arguments on this issue, a new administration will move into the White House, accompanied by a new Solicitor General and perhaps a new Supreme Court Justice.  The changing political landscape may include a shift from pro-employee to pro-business policy, which could lead to a decision upholding the legality and validity of the class action waivers.  Still, employers with these collective action waivers in their existing arbitration agreements should be prepared to obtain revised, executed agreements in the event the Court sides with the NLRB and finds the waivers unenforceable or somehow narrows the acceptable legal scope of such waivers.  

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