US Supreme Court to Address Enforceability of Arbitration Clauses in Employment Agreements

On October 2, 2017, the United States Supreme Court will hear oral argument to decide whether mandatory arbitration clauses in employment agreements violate the National Labor Relations Act (NLRA).

The cases come before the Court to resolve a circuit split on whether class action waivers violate employees’ rights to engage in concerted activity under the NLRA.

Mandatory Arbitration Clauses in Employment Agreements

Many employers include arbitration clauses in employee agreements that employees are required to sign as a condition of employment. These clauses require employees to resolve all disputes through mandatory binding arbitration under the Federal Arbitration Act (FAA). Many of these clauses include language that prohibits employees from participating in class action lawsuits. The question before the Supreme Court will be whether these clauses violate employees’ rights to engage in concerted activity, which is protected under the NLRA.

The NLRA mandates that employees be able to engage in concerted activity. Traditionally, concerted activity has referred to the ability to form and participate in union activities. However, as more and more employment agreements include class action waivers, courts have had to consider whether such waivers violate the NLRA.

The National Labor Relations Board (NLRB) has taken the position that employers violate the NLRA when they require employees to sign employment agreements that require the employee to forfeit the ability to have disputes decided through a class action lawsuit. If the Supreme Court agrees, employers will no longer be able to prohibit employees from participating in class action lawsuits. If the Supreme Court disagrees with the NLRB, it will close the courthouse doors to employees, who will not be permitted to file class action lawsuits to address grievances they have with their employers, and instead must resolve disputes through mandatory binding arbitration

US Supreme Court to Resolve Circuit Split

The Supreme Court agreed to hear the case to resolve a split between the Federal Circuit Courts. Three courts of appeal have held that class and collective action waivers do not violate the NLRA, while three other courts of appeal have held that they do.

In D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), and Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), the 5th Circuit Court of Appeals held that class action and collective action waivers do not violate the NLRA. The 2nd and 8th Circuit Courts agreed, and enforced arbitration clauses in employment agreements that require employees to submit to mandatory binding arbitration.

On the other side, the 7th, 9th, and 6th circuits disagreed, holding that arbitration agreements that prohibit employees from participating in collective and class action lawsuits do violate the NLRA.

When Circuit Courts of Appeals come to different conclusions on the same point of law, this creates a circuit split, which makes the issue ripe for appeal to the US Supreme Court.

Questions About Arbitration Clauses in Employment Agreements? Contact Brady & Associates Today

The issue is unlikely to be resolved until the end of the year. If you have questions about your employment agreement, whether it contain a mandatory arbitration clause, and how that impacts you, contact the experienced employment law attorneys at Brady & Associates today.

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