Supreme Court to Decide Class Action Waiver Issue

McGuireWoods LLP

The Supreme Court issued an order today agreeing to hear three cases involving the National Labor Relations Board’s holding that class and collective class action waivers violate Section 8(a)(1). According to the Board’s first decision on the matter in D.R. Horton, an “individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7 … central to the [NLRA’s] purposes.”

The first of the three cases that the Supreme Court will hear is NLRB v. Murphy Oil USA, Inc., where the Fifth Circuit Court of Appeals held, contrary to the NLRB, that an employer does not commit an unfair labor practice by requiring its employees to sign arbitration agreements with class claim waivers. The Fifth Circuit’s decision tracked its prior opinion in D.R. Horton, where the court rejected the NLRB’s reasoning given Supreme Court precedent upholding class action waivers in in other contexts under the Federal Arbitration Act (FAA).

The other two cases to be heard upheld the NLRB’s determination that collective and class action waivers violate the Act. In Epic Systems Corp. v. Lewis, the Seventh Circuit found that the employer’s agreement “runs straight into the teeth of Section 7,” and “[c]ontracts that stipulate away employees’ Section 7 rights or otherwise require actions unlawful under the NLRA are unenforceable.” In so deciding, the Seventh Circuit found no conflict between the NLRA and the FAA.

In Ernst & Young LLP v. Morris, a split panel of the Ninth Circuit followed the Seventh Circuit’s lead and held that the employer’s class action waiver was invalid because Section 7 of the NLRA gives employees the right to file legal claims as a class.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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