The Latest Arbitration Decision By The United States Supreme Court Is Epic
May 24, 2018
On May 21, 2018, the United States Supreme Court, in a 5-4 decision, held that employment arbitration agreements containing class and collective litigation waivers must be enforced under the Federal Arbitration Act (FAA). Justice Neil Gorsuch penned the majority decision, in Epic Systems Corporation v. Lewis, stating “Congress has instructed in the [Federal] Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the [National Labor Relations Act (NLRA)] suggests otherwise.”
Although the FAA’s saving clause invalidates arbitration agreements that conflict with other laws, the Court found no such conflict in this case. Specifically, the Court rejected the position taken by the National Labor Relations Board (NLRB) that a collective action waiver, as a condition of continued employment, violated employees’ rights to engage in concerted activity protected by Section 7 of the NLRA. Rather, the Court found that the NLRA's protection of "concerted activities" did not override the FAA because the Court could give effect to both laws, and there was no clear and manifest intent for the NLRA to displace the FAA. Therefore, the arbitration agreements must be enforced as written. The Court’s decision in Epic resolves a disagreement between the Circuit Courts as to the enforceability of class and collective action waivers in arbitration agreements.
Recently, in Hamden Coal, LLC v. Varney, the Supreme Court of Appeals of West Virginia enforced an arbitration agreement in an employment context, requiring that West Virginia Human Rights Act and deliberate intent claims be arbitrated. There, the court held that, in an employment agreement, a mutual obligation to arbitrate a claim was sufficient consideration to form a contract. Importantly, the Varney Court acknowledged that “parties may contractually agree to a shortened limitations period, as long as the period is reasonable.”
These recent decisions in Epic and Varney give reason for employers to re-evaluate whether to include an arbitration provision in their employment agreements. If they currently include an arbitration provision in their employment agreements, employers should review their contract language and apply the guidance afforded by Epic and Varney to obtain the greatest benefit.