Protecting Employers Since 1985

Class Action Waiver Clauses in Arbitration Agreements Face Further Scrutiny

Arbitration agreements are a common tool many employers use as an alternative to going to court to resolve disputes with their employees. Arbitration has the potential to be a faster, cheaper, and more private way to resolve disputes, with more finality. One of the biggest advantages many employers see in arbitration is the ability to resolve disputes individually rather than as part of a class action. However, the NLRB has determined that, in its opinion, these waivers violate employees’ right under federal labor law to engage in “concerted activities” for their “mutual aid or protection.” This has caused uncertainty as to the legality of such class action waivers in arbitration agreements in the employment arena.

The NLRB first took issue with arbitration clauses that state that any claims against the employer must be brought through individual arbitration, rather than group arbitration or class action lawsuits in court, in its 2012 D.R. Horton decision. Until this year, courts generally disagreed with the NLRB’s interpretation on this issue. However, that did not stop the NLRB from continuing to invalidate these class action waivers in arbitration agreements. Then this year, the Seventh Circuit Court of Appeals, which covers Illinois, Wisconsin, etc., agreed with the NLRB, created a split among the federal courts of appeals. Now, a second court of appeals has agreed with the Seventh Circuit, with the others to have decided the issue disagreeing (including the Eighth Circuit, which covers Minnesota, Iowa, etc.). With this sort of split among the courts of appeals, employers and the NLRB alike have petitioned the Supreme Court to resolve the issue once and for all.

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