Arbitration Agreements/Class Action Waivers
by Tony Renning of Strang, Patteson, Renning, Lewis & Lacy, s.c. 920.420.7527
Until late May, the enforceability of employer-required arbitration programs remained uncertain due to a split of authority – some federal courts holding that arbitration agreements containing provisions that restrict employees’ rights to pursue class actions violate Section 7 of the National Labor Relations Act (NLRA) and are thus unenforceable under the Federal Arbitration Act (FAA) – and others holding that such provisions were enforceable as written pursuant to the FAA.
The United States Supreme Court ruled that the use of arbitration agreements to resolve employment-related disputes through arbitration do not violate the NLRA. The Supreme Court’s opinion resolved three cases that were argued together (Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil, USA). Each arose when an employee who had signed an employment agreement that contained an arbitration provision filed a lawsuit, seeking to bring both individual and collective claims. The employers argued that, under the terms of the arbitration agreements, the employees needed to go to individual arbitrations, and the Supreme Court agreed. The decision was a huge victory for employers.
Employers with arbitration agreements should review their mandatory arbitration programs to ensure they do not contain anything potentially unconscionable. Employers should also review the process by which new employees enter into a mandatory arbitration program to ensure there are no enrollment-related circumstances which constitute duress and sufficient consideration exists. Finally, employers should remove any voluntary opt-out provision.
Employers without mandatory arbitration programs should consider whether to impose such programs or not. Employers may benefit in a number of ways: First, proceedings before a neutral arbitrator are handled in private whereas lawsuits are public. Second, procedures and evidentiary rules differ between arbitration and court proceedings. Third, arbitration awards generally cannot be appealed, meaning disputes can get to a final resolution quicker.
However, there are also downsides: First, arbitration of an issue can mean resolution of an issue with one employee does not bind or even influence the resolution of that same issue with other employees. Second, arbitration may not always be less expensive since the employer must pay its own attorneys’ fees as well as most of the arbitration and arbitrator fees.
The fact that you can require employees to sign arbitration agreements does not always mean you should. Employers considering mandatory arbitration programs should carefully evaluate the pros and cons of submitting employment-related disputes to binding arbitration and seek legal advice.
For advice and counsel concerning mandatory arbitration programs and, specifically, the use of arbitration agreements and/or class waivers, contact Tony Renning at (920) 420-7527 or firstname.lastname@example.org.
Tony Renning is a founding shareholder with Strang, Patteson, Renning, Lewis & Lacy, s.c. This article is intended to provide information only, not legal advice. For advice regarding a particular labor or employment situation, please contact the attorneys at Strang, Patteson, Renning, Lewis & Lacy, s.c.