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U.S. Supreme Court Upholds Enforceability of Arbitration Provisions in Employment Contracts

In a case that has far-reaching impact on the millions of employers with employees who are employed under employment contracts, the United States Supreme Court held on May 21 in Epic Systems Corp. v. Lewis that class actions cannot be brought by employees who contractually agreed to resolve employment disputes via individual arbitrations.

In a 5-4 decision authored by Justice Gorsuch, the United States Supreme Court reversed a Seventh Circuit decision and held that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced….”

In Epic, the Supreme Court had consolidated three cases, Epic Systems Corp. v. Lewis (Docket 16-285), Ernst & Young LLP v. Morris (16-300), and National Labor Relations Board v. Murphy Oil USA, Inc. (16-307). In each of these cases, employees sought to litigate Fair Labor Standards Act and related claims through class or collective actions. In each of these cases, the employer and employees had entered into contracts providing for individual arbitration agreements to resolve employment disputes. The employees argued that those agreements violated the National Labor Relations Act, and that the “saving clause” of the Federal Arbitration Act in effect removed the obligation for separate arbitrations.

In upholding the enforceability of arbitration agreements, the Supreme Court also stated that “neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.” The May 21, 2018 ruling was long-anticipated and it will have far-reaching consequences in employment and labor law. 

© 2020 Heyl, Royster, Voelker & Allen, P.CNational Law Review, Volume VIII, Number 149
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Employers are faced with more and more challenges in running their businesses due to the vast number of laws and regulations governing the workplace. An incorrect decision today may cost an employer a tremendous amount of time and money in the future. Our Employment & Labor Practice spans our six offices to provide a team approach to advising and defending employers on the most areas affecting employment, such as disciplinary actions, terminations, reductions-in-force, wage and hour issues, restrictive covenants, employment agreements, and various leave issues.

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