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Paul Zimmerman

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Attention Employers: The Supreme Court Has Spoken On Class Action Waivers

The U.S. Supreme Court finally issued its long-awaited decision in Epic Systems Corp. v. Lewis, finding that class and collective action waivers contained in employer arbitration agreements are lawful and enforceable under the Federal Arbitration Act. To the delight of employers across a range of industries nationwide, the Court’s 5-4 decision means that companies can use arbitration agreements to prohibit workers from bringing or participating in class or collective actions over workplace issues (e.g., wage/hour claims).

While the decision in Epic Systems is certainly a positive for business, employers should proceed with caution, as we sense the plaintiffs’ bar isn’t simply going to acquiesce without a fight. Going forward, we expect the language of arbitration agreements to be heavily scrutinized and challenged in the courts, as a variety of grounds can exist to render an arbitration agreement unenforceable – whether or not it contains a class or collective action waiver component. Likewise, the Court’s determination in Epic Systems does nothing to restrict states or localities from specifically permitting class or collective actions under state or local law (such as California’s Private Attorneys General Act).

What’s the practical takeaway of the Epic Systems decision? The following four steps should help guide employers:

First, while the high court has given a nod to class action waivers, each employer must remain diligent and ensure that its arbitration provisions are drafted in compliance with current law.

Second, employers should be transparent about arbitration agreements containing class and collective action waivers. Rather than concealing such waivers within a lengthy employee handbook, such a provision should be included in a freestanding agreement. Employers might even consider including as an attachment to an arbitration agreement the rules of the employer’s chosen alternative dispute resolution agency (or, at least, provide a link to the rules online).

Third, consideration should be given to timing (read: when to present the arbitration agreement). For instance, wouldn't it make sense for an employer to let a new hire know that a condition of employment is the waiver of her constitutional right to bring a claim in court before she leaves an existing job and moves cross country to begin a new one?

Fourth, one last consideration is . . . consideration. If an employer wants to update an existing employee’s arbitration agreement with class action waiver language, that revision will need to be supported by adequate consideration.

If interested in a deeper dive on class action waivers, the labor and employment lawyers at Michelman & Robinson, LLP are just a phone call or email away. In the meantime, we’re here to help craft effective and enforceable arbitration agreements that’ll stand up to the scrutiny anticipated in the aftermath of Epic Systems.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.