After years of litigation across the country and sharply divided rulings among the Circuits (some damning class/collective action waivers and others enforcing them), and over seven months after oral argument, the United States Supreme Court upheld the enforceability of arbitration agreements that include class and collective action waivers. It was a close decision, 5-4, like many key workplace law rulings. The ruling can be read here.
Having an arbitration agreement with a broad waiver against multi-claimant litigation can play a significant role in reducing risk and the cost of defending claims. If an employer is sued by an employee, for example, the claims would be “transferred” from state or federal court to an arbitral forum. In that arbitration, the scope of claims would be limited to the single claimant (rather than facing a jury trial and claims brought in behalf of a class). An agency (e.g., DOL, EEOC) could still pursue a claim on a systemic or class basis, but agency litigation is far less frequent than private litigation. Clearly, a class waiver agreement (and the avoidance of jury trials in federal and state courts) could materially reduce exposure and possibly legal fees. Other than in “rocket docket” Circuits, arbitrations tend to occur more quickly than court adjudications, thus reducing potential back pay and spurring claims toward resolution while memories are fresh and witnesses are more likely to be available.
Jackson Lewis was counsel in one of the consolidated cases where the lower court held the waivers enforceable (Fifth Circuit), which was affirmed by the Supreme Court. The other Circuits (Seventh and Ninth) were reversed.
For a more detailed analysis of the Court’s decision click here.