More than 7 months after hearing oral argument on an issue that will affect countless employers across the country – whether employers may implement arbitration agreements with class action waivers — the United States Supreme Court has issued what is bound to be considered a landmark decision in Epic Systems Corp. v. Lewis (a companion case to National Labor Relations Board v. Murphy Oil USA and Ernst & Young LLP v. Morris), approving the use of such agreements.

The decision will certainly have a tremendous impact upon pending wage-hour class and collective actions, many of which had been stayed while the courts and parties awaited the Supreme Court’s decision.  And it is likely to lead many more employers to implement arbitration agreements with class action waivers going forward, if only to avoid the in terrorem effect of those types actions.

In a 5-4 vote along the very lines that many commentators had predicted, with newest Supreme Court Justice Neil Gorsuch penning the majority opinion, the Supreme Court determined that the law is “clear” that class action waivers are enforceable under the Federal Arbitration Act (“FAA”) – and that they are not prohibited by the National Labor Relations Act (“NLRA”), as several Circuit Courts had concluded following the National Labor Relations Board’s (“NLRB”) DL Horton decision.

In reaching this decision, the Court took great pains to address – and reject – the various arguments presented by the former NLRB General Counsel, the related labor union and various amicus briefs submitted by the plaintiffs’ bar.  In so doing, the Court noted that for the first 77 years of the NLRA, the NLRB had never argued that class action waivers violated the Act; instead, the FAA and the NLRA had coexisted peacefully.  In fact, as the Court pointed out, as recently as 2010 the NLRB’s General Counsel had asserted that class action waivers did not violate the NLRA.

The decision is an unqualified victory for employers, particularly those who already have such arbitration agreements in place.  Given the prevalence of wage-hour class and collective actions, and the potential exposure in even the most baseless of suits, other employers would be wise to consider whether they, too, wish to implement such agreements.

Not unimportantly, the decision might give employers new grounds to argue that employees who sign such agreements are prohibited from pursuing representative claims under California’s Private Attorneys General Act (“PAGA”).  Even if those new arguments prove to be unavailing – to date, the California state courts have held that such claims cannot be compelled to arbitration because they belong to the state, not the employee –the Supreme Court’s decision could be used to require that an individual arbitrate his or her individual claims first such that he or she would not have standing to pursue the PAGA claims if the employer prevailed in arbitration.

And employers should be mindful that in some states (California again), an employer must pay virtually all of the costs of the arbitration process, a reality that has led more than a few plaintiffs’ lawyers to file multiple individual arbitrations in order to drive up employers’ costs to try to force them to the settlement table.

Our colleague Steven M. Swirsky at Epstein Becker Green has a post on the Management Memo blog that will be of interest to our readers: “NLRB Reverses Key Rulings: Returns to Pre-Obama Board Test for Deciding Joint-Employer Status and for Determining Whether Handbooks, Rules and Policies Violate the NLRA – Assessment of 2014 Expedited Election Rules and Future Changes Also Announced.”

Following is an excerpt:

It should come as no surprise that recent days have seen a stream of significant decisions and other actions from the National Labor Relations Board as Board Chairman Philip A. Miscimarra’s term moves towards its December 16, 2017 conclusion.  Chairman Miscimarra, while he was in a minority of Republican appointees from his confirmation during July 2013 and as a new majority has taken shape with the confirmation of Members Marvin Kaplan and William Emanuel, has clearly and consistently explained why he disagreed with the actions of the Obama Board in a range of areas, including the 2015 adoption of a much relaxed standard for determining joint-employer status in Browning-Ferris Industries, the standard adopted in Lutheran Heritage Village for determining whether a work rule or policy, whether in a handbook or elsewhere would be found to unlawfully interfere with employees’ rights under Section 7 of the National Labor Relations Act to engage concerted action with respect to their terms and conditions of employment, and his disagreement with the expedited election rules that the Board adopted through amendments to the Board’s election rules. …

In Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., decided on December 14, 2017, in a 34-2 decision, the Board has discarded the standard adopted in Browning-Ferris, and announced that it was returning to the previous standard and test for determining joint-employer status and returning to its earlier “direct and  immediate control standard.”  …

In The Boeing Company, also decided on December 14, 2017, the Board adopted new standards for determining whether “facially neutral workplace rules, policies and employee handbook standards unlawfully interfere with the exercise” of employees rights protected by the NLRA. …

Noting that the 2014 Election Rules were adopted over the dissent of Chairman Miscimarra and then Member Harry Johnson, and the fact that these rules have now been effect for more than two years, on December 14th, the Board, over the dissents of Members Mark Pearce and Lauren McFerren, both of who were appointed by President Obama, published a Request for Information, seeking comment …

Read the full post here.