On May 21, 2018, the United States Supreme Court ruled that employers may require employees to enter arbitration agreements that waive their rights to seek class-action claims against the employer. The split, 5-4 decision was authored by Justice Neil Gorsuch, rejecting the position held by the National Labor Relations Board (NLRB) that any of these types of class-action waivers violated employees’ rights to engage in “concerted activities” with regard to terms and conditions of employment, a protection afforded by the National Labor Relations Act (NLRA).

The ruling drew criticism from Justice Ginsburg, who voted with Justices Breyer, Kagan and Sotomayor as the dissenters and called the ruling “egregiously wrong.”

About the case

The case in question, Epic Systems Corp v. Lewis, actually featured three cases combined into one. In each of these cases, an employer and employee entered into a contract that required individual arbitration processes to settle labor and employment disputes.

As background, the NLRB ruled in 2012 that the NLRA essentially nullified the Federal Arbitration Act’s policy favoring enforceability of these arbitration agreements when any class-action waivers are involved in the case. At the time, the NLRB reasoned that any class-action claims related to employment disputes are a type of concerted activity protected under the stipulations of the NLRA. Since that ruling, courts have been split as to whether or not they must defer to this precedent set by the NLRB. The Supreme Court’s ruling clarifies the issue.

The impact

So what does this decision by the court mean moving forward for class-action employment cases?

Now, employers across the nation are allowed to include clauses in contracts or other arbitration agreements that make it mandatory for employees to resolve their employment disputes in individual arbitration proceedings rather than entering into class-action suits or other collective acts in cases where those agreements are governed by the Federal Arbitration Act.

Any clauses that require individualized arbitration allow employers to handle disputes in the workplace more efficiently on a one-on-one basis, and these employers are now protected from elevated risk of large judgments and major class-action suits.

It is expected that, moving forward, employers will be more likely to include mandatory arbitration agreements that have collective and class action waivers as a condition of employment. This means fewer class-action suits nationwide, less risk of employer liability for workplace disputes and less expense faced by employers in defending these types of cases.

For more information about how this case could impact businesses throughout the United States, get in touch with an experienced corporate planning attorney in the U.S. Virgin Islands today.

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor and Employment Practice Group at BoltNagi PC, a full service business law firm that serves the U.S. Virgin Islands.