Justices: Employers Can Ban Class Action Suits

In a landmark opinion on an important issue to employers, the Supreme Court held last week that employers can enforce class action waivers in arbitration agreements.

This watershed decision is good news for employers because it confirms they can use arbitration agreements to avoid class and collective actions of employment claims.

But such arbitration agreements are not a one-size-fits-all solution. Employers must consider what makes the most sense for their business interests, workforce, and culture.

For employers that already have agreements containing arbitration as the selected means of dispute resolution, the question is whether to now include a class or collective action waiver either by:

• Explicitly prohibiting class/collective claims; or
• Explicitly requiring that all claims be brought by employees individually and not jointly.

Adding a class action waiver to an existing arbitration provision should not require heavy lifting from a drafting perspective, and doing so is likely an easy decision for many employers.

Whether you include a class waiver or not, now is a good time to revisit your existing arbitration provision to make sure it will be enforceable generally, as employees often have other avenues they can pursue to void certain contractual provisions.

Arbitration agreements must have certain procedural protections for employees, including making sure that the employee has affirmatively agreed to arbitrate any claims on an individual basis. So, a simple policy in your handbook may not always be sufficient. Having completed that review, you may decide to leave things status quo, taking comfort that your arbitration provision is enforceable. But for employers that have not reviewed their arbitration provisions for years, the law and marketplace have evolved over time, and these employers should modernize their agreements.

Source: National Law Review