Thanks to a recent ruling by the Supreme Court, employers can now be confident that arbitration agreements and class action waivers are enforceable and do not violate the National Labor Relations Act.
The debate started in 2011 with AT&T Mobility Servs. v. Concepcion, which held that arbitration provisions were enforceable when included in consumer contracts.
It further held that these agreements barred participation in class action litigation. Employers began to adopt similar agreements to protect their plans against significant litigation.
The National Labor Relations Board (NLRB) responds
After the AT&T ruling, the NLRB concluded that the decision, and class action waivers, violated protections on “concerted activity.”
This created conflict between courts which favored class action waivers and the National Labor Relations Act (NLRA) which seemed to indicate, according to the NLRB, the contrary.
In fact, many district and appellate courts adopted the NLRB’s position on the issue.
The current supreme court ruling
In Epic Systems Corp. v. Lewis, released in October 2017, the court split 504 to rule in favor of arbitration, established in the Federal Arbitration Act.
They argued that the NLRA’s protections on “concerted activity” should be interpreted in the context of traditional activity such as unions and collective bargaining, not civil litigation that arises under other statutes.
However, Justice Gorsuch, writing for the majority, did acknowledge the policy arguments against class action waivers and specifically stated that, while the opinion followed precedent, that it should not be seen as endorsing such policies.
Yet significant weight was given to the Federal Arbitration Act. The implication is that the courts will be expected to enforce arbitration agreements between private parties, such as employers and employees, unless federal law expressly limits those agreements.
Employers, ERISA plans, and class-action waivers
While this may not be the end of the battle, unless the question is taken up in Congress, employers who have already adopted or choose to adopt arbitration agreements and class-action waivers with their employees can be reasonably confident those agreements will hold up in court.
If your company has not done so already, consider including these provisions in your ERISA-covered health and retirement plans.
Arbitration agreements ensure that, in the event of a disagreement, both parties will submit their concerns before an arbitrator who is generally an expert in the subject area. Further, arbitration can also be done quickly and in relative privacy, avoiding the cost and public records of a full court hearing.
A class-action waiver, meanwhile, is designed to prevent employees from bringing their concerns together in a class. While many employees may have similar concerns and such a waiver will not stop them bringing those issues to court in the event of serious wrong-doing, it makes smaller problems less economically viable for plaintiff’s attorneys to undertake.
Anne Tyler Hall is the owner and principal attorney of Hall Benefits Law. HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.