On October 2, 2017, the United States Supreme Court heard a one-hour oral argument in three consolidated arbitration cases involving the National Labor Relations Act and the Federal Arbitration Act: Epic Systems Corp. v. Lewis, No. 16-285; National Labor Relations Board v. Murphy Oil USA, No. 16-307; and Ernst & Young LLP v. Morris, No. 16-300. The Court was asked to resolve a split among the U.S. Courts of Appeals and to decide whether agreements to forgo class actions or collective proceedings and instead resolve disputes between an employer and its employees through arbitration are enforceable under the Federal Arbitration Act.

Ultimately, the arguments centered on the reconciliation of two federal laws: the Federal Arbitration Act (“FAA”) and the National Labor Relations Act (“NLRA”). Arbitration agreements requiring employees to waive their right to bring or participate in a class or collective action have long been enforced pursuant to the FAA, which provides that arbitration agreements “shall be valid, irrevocable, and enforceable.” However, the National Labor Relations Board (“NLRB”) has found employer arbitration agreements that included waivers of an employee’s right to bring class actions to be invalid, relying on its interpretation of the NLRA, which protects workers’ rights to engage in “concerted activities.”

During oral argument, the Supreme Court was divided, with the exception of two justices who remained silent. Four justices (Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan) asked questions which suggested it is their view that these types of arbitration agreements are irreconcilable with the NLRA’s protection of employee rights to act concertedly to improve the terms and conditions of their employment. On the other hand, Chief Justice John Roberts and Justice Samuel Alito asked questions suggesting that they hold the opposite view. Justice Anthony Kennedy noted during his questioning that employees could still work together to obtain the same counsel but were merely prohibited from joining their cases and litigating collectively.  

The Court’s decision will provide certainty to both employers and employees on the issue of class waivers in arbitration agreements. We will update you as to when the Supreme Court issues its opinion, and advise you further at that time.