SCOTUS Decision on Class Action vs. Arbitration

Understanding the Supreme Court Decision on Class Action Arbitration Agreements, Epic Systems v. Lewis

On May 21, 2018, the U.S. Supreme Court decided in a landmark case, Epic Systems v. Lewis, that individual arbitration clauses between employers and employees must be enforced, thus making it more difficult for employees to file class action lawsuits. This decision is a huge win for employers, as avoiding costly class action lawsuits is in every employer’s best interest.

Federal Arbitration Act (FAA) and National Labor Relations Act (NLRA)

The two laws at issue in Epic Systems v. Lewis were the Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA). The FAA was enacted in 1925 to provide for private resolution of disputes through arbitration, whereas the NLRA, enacted about 10 years after the FAA, was designed to empower employees to take collective actions against their employers. While not directly contradictory, these two laws presented an interesting clash in this case as the employer fought for strict enforcement of the laws written in the FAA, while the worker wanted the Supreme Court to find that class action lawsuits are considered protected concerted activities under the NLRA. Ultimately, the Court held that the black letter law written in the FAA is what governs, and any individual arbitration clauses found in employment contracts must be enforced. Furthermore, the Court decided that “concerted activities” in the context of the NLRA do not include class action suits.

Impact of Epic Systems v. Lewis on Employers

If your employment contracts currently include arbitration clauses, it is a good idea to revisit them now and make sure arbitration still aligns with your company’s vision and goals. If you decide to maintain your abitration agreements, you should revise them to include waivers of class and collective actions.

If your employment contracts already contain mandatory arbitration clauses with class action waivers in place, then you are off to a great start. You will just want to make sure your mandatory arbitration clauses do not contain anything unconscionable that would be clearly unfair to your employees.

If you are one of the many businesses that decided to hold off on incorporating arbitration clauses into your employment contracts until after a decision was made in Epic Systems v. Lewis, you will want to evaluate whether the benefits of arbitration outweigh the detriments in your specific case. Benefits of arbitration may include factors such as a more efficient dispute resolution timeline, confidentiality, reduced attorneys’ fees, and a more predictable outcome. Detriments to arbitration may include issues like a potentially pricey arbitration, less possibility to appeal an undesirable decision, and less possibility of prevailing on a motion to dismiss or a motion for summary judgment. Each company is different, so each company will have to make its own decision on whether the pros of arbitration outweigh the cons.

Contact a Texas Employment Attorney Today

After reading this brief overview of the Supreme Court decision in Epic Systems v. Lewis, you will most likely still have questions. The employment attorneys at Simon Paschal are well-versed on the intricacies of the decision and can provide you with a more in-depth analysis of how this landmark decision affects your business. Contact us online or at 972-893-9340 today to learn more.

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