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Employers Using Arbitration Agreements to Stop Class Action Lawsuits

Consumer arbitration clauses are not the only type of arbitration agreements we face today. Employers are increasing their use of arbitration agreements with their employees. It has become rather common for employers to include arbitration agreements in their company policies, posting them or making them available online. There are many issues that these agreements pose for employees who may have actionable claims against their employers. One important issue that has been recently addressed by the courts is the use of arbitration clauses to eliminate the ability of employees to bring class action lawsuits against their employers.

The legal issue in Epic Systems Corp. v. Lewis

In Epic Systems Corp. v. Lewis, the U.S. Supreme Court addressed the question of whether it is appropriate for an arbitration clause to restrict class action lawsuits. More specifically, the issue seems to be whether the provisions of the National Labor Relations Act (NLRA), which protect employees’ rights to engage in collective activities, make those types of restrictions unlawful.

The conflict between the NLRA and the Federal Arbitration Act

The NLRA grants employees the right to establish a union. The Federal Arbitration Act (FAA), on the other hand, requires the enforcement of mandatory arbitration agreements even in the employment context. Based on prior interpretations of the NLRA, that arbitration clauses cannot prohibit class actions, there appears to be a conflict between the two statutes. As a result, many employees have filed lawsuits arguing that the protections of the NLRA override the FAA. The recent decision in Epic Systems Corp. v. Lewis demonstrated that the answer to the question is a close one. In a 5-4 decision, the U.S. Supreme Court has ruled that the NLRA does not override the mandates of the FAA because that was not the intent of Congress.

Why employers favor mandatory arbitration clauses

Employers make good use of mandatory arbitration clauses because they prevent employers from filing class action lawsuits against them, among other things. This is particularly beneficial for large-size employers because they can avoid lawsuits filed by hundreds or even thousands of employees. Arbitration provides many benefits to employers because it saves them a substantial amount of time and money in litigation. Unfortunately, in many cases, arbitration clauses violate the rights of employees. These issues can be very tricky. If an employer is trying to enforce a mandatory arbitration clause against an employee, there are many legal issues that need to be analyzed, including whether the agreement is valid.

If you feel you have been the victim of discrimination or retaliation in the workplace, or if you have any other questions regarding your employment rights, please contact the experienced employment law attorneys at Wrady & Michel, LLC. You can contact us either online or by calling us at (205) 265-1880. We are here to serve you!