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BLOG / 06.08.18 /Jack Malley

Supreme Court Opens Door For Employers To Require Employee Class Action Waivers

In a long awaited and hotly contested case, the United States Supreme Court has upheld an employer’s right to require employees to waive their right to commence or join class and collective action lawsuits against their employer. This decision, in Epic Systems Corp. v. Lewis, provides a powerful mechanism for an employer to reduce the risk of costly and time-consuming multi-plaintiff litigation.

It has been well-settled for decades that an employer can require its employees to submit disputes with the employer to arbitration as a condition of employment. More recently, employers have sought to secure in the arbitration agreement an employee’s waiver of the right to join or bring a class or collective action lawsuit against the employer. The vast impact of such waivers can be readily seen in the context of collective actions filed against employers for failure to pay wages, including overtime. The amount of these actions has increased exponentially over the past decade because liable employers are required by statute to pay the employees’ attorneys’ fees, and in many cases employees are entitled to a 100% penalty on top of the wages they recover. Now, as a result of the decision in Epic, employers can reduce the litigation expense risk of such wage and hour collective actions to a great extent.

Employers should take the opportunity provided by the Supreme Court to review their onboarding procedures, and consult counsel to analyze whether or not they should require class and collective action waivers as part of their business plan. As a proviso, we note that the New York State Legislature recently passed a law, effective July 11, 2018, which prohibits mandatory arbitration of sexual harassment claims. As such, New York employers should not include such provisions in any arbitration agreement, whether or not the agreement includes a class or collective action waiver. Much of the legal community believes that the New York law will be preempted by the Federal Arbitration Act. However, we will not have firm guidance on the preemption question until a court determines the merits of the first legal challenge to the New York law.