On Monday, the U.S. Supreme Court issued a long-awaited decision confirming the enforceability of class action waivers in employment arbitration agreements.

The background:

As previously written, in 2016 the Ninth Circuit held that class action waivers in employment arbitration agreements were unenforceable. The decision created a circuit split with the Seventh Circuit aligning with the Ninth. The Second, Fifth and Eighth Circuits however, have been validating class action waivers. Predictably, the matter was brought before the U.S. Supreme Court to “clear the confusion.”

In essence, the employees argued the National Labor Relations Act (NLRA) – which provides employees the right to act together and unionize – invalidates class and collective action waivers in arbitration agreements.  

The Supreme Court disagreed and held the class and collective action waivers are enforceable. Among other reasons, the Supreme Court opined there was no congressional intent for the NLRA to repeal the right to arbitrate under the Federal Arbitration Act and the NLRA does not include the right to engage in class action proceedings – due to the fact that when the NLRA was adopted class action proceedings “were hardly known”.

For now, employers can include class action waivers in arbitration agreements. There are many pros and cons for arbitration that employers should consider very carefully.

California employers are further advised that not all collective proceedings can be waived, as the state does not allow waiver of PAGA claims in arbitration agreements. Also, a pending bill threatens to prohibit CA employers from making it a condition of employment that employees agree to arbitrate.

Although class action waivers are permitted, unconscionability or lack of consideration may invalidate an arbitration agreement as a whole.