The U.S. Supreme Court gave a huge win to employers on May 21, 2018, in its much-anticipated decision in Epic Systems Corp. v. Lewis, upholding the validity of arbitration agreements that require employees to arbitrate claims against their employer on an individual—as opposed to a class or collective—basis. At issue before the Court was whether such class/collective waivers run afoul of an employee’s right to engage in “concerted activities” as provided under the National Labor Relations Act ("NLRA").
The gist of the Court’s opinion is that Congress intended for arbitration agreements to be enforced on their terms, including agreements for one-on-one arbitration; the NLRA does not confer a right to arbitrate or litigate as a class or collective; and in any event, the NLRA does not overcome Congress' intent that arbitration agreements be enforced.
Here's what the Court's decision may mean for your company, and what's likely on the horizon:
1. Consider using arbitration agreements: By now, many employers have rolled out arbitration agreements with class waivers. If your company has not, consider the benefits of doing so. Arbitration agreements can be an effective way for businesses to keep employment disputes private (as opposed to a lawsuit in open court), streamline the dispute-resolution process, and significantly reduce litigation costs. Having an enforceable class/collective waiver in an arbitration agreement provides even more protection by ensuring that a single disgruntled former employee cannot turn an individual claim into an expensive and burdensome class or collective lawsuit. However, also consider that rolling out arbitration agreements requires careful planning to minimize the employee and public relations issues that may arise, particularly in light of the #metoo movement.
2. Ensure enforceability of your arbitration agreements. While the Court’s ruling means that class/collective waiver provisions are enforceable, employers must still take care that the arbitration agreements are themselves enforceable. Below are just a few enforceability factors to be aware of:
(a) Be sure that the arbitration agreement is supported by proper consideration. This is of particular importance if you wish to have current employees sign an arbitration agreement.
(b) Take care to minimize the risk that your agreement will be found substantively unconscionable. For example, attempting to shift the burden of the arbitration costs, trying to obviate the fee-shifting provisions of some statutory claims, or seeking to limit your employees’ rights to bring specific claims increase the chances that a court will find your agreement unenforceable.
(c) Beware of procedural unconscionability, too. For instance, inserting the key arbitration/class-waiver provisions in the middle of a lengthy document laden with legal jargon and/or depriving your employees of a meaningful opportunity to consider the substance of the document put your arbitration agreement at risk.
3. Plan to arbitrate. Plaintiffs’ attorneys have become very comfortable arbitrating claims. You should take care that you have a carefully planned arbitration strategy going forward. Some of the obvious questions include:
(a) What arbitration forum is best for your company (JAMS, AAA, etc.)?
(b) Are you familiar with arbitrators in your geographic location?
(c) How likely are you to agree to bellwether cases if threatened with numerous arbitrations on one set of similar legal issues or facts?
(d) Do you want to exempt any claims from arbitration?
(e) What kind of discovery procedures are you willing to stipulate to?
Whether or not to implement a new arbitration agreement or expand your current agreement to include a class/collective waiver is a business-centered decision based on a variety of factors.