U.S. Supreme Court Approves Employers’ Use of Class Action Waivers

In Epic Systems Corp. v. Lewis, a 5-4 decision issued on May 20, 2018, the U.S. Supreme Court held for the first time that employers can require as a condition of employment that employees waive their rights to participate in class or collective action lawsuits. This decision puts to rest any argument that the National Labor Relations Act prevents or limits the enforceability of these waivers in arbitration agreements with employees.

The decision provides employers further options for limiting litigation risk, particularly with respect to costly wage and hour collective actions. Such actions typically involve a group of employees pursuing claims for unpaid overtime or other wages. Wage and hour collective actions are attractive to plaintiffs’ attorneys since, if the plaintiffs prevail, they can recover their attorney’s fees and liquidated, or double, damages.

Because of this decision there is no longer any identified legal impediment in Texas to the concept of an employer requiring its employees to waive the ability to bring a class or collective action under federal, state, and local employment laws.

Takeaways for Employers:

  • Review any existing arbitration agreements with your employees to determine if those agreements contain class and collective action waivers and if so, consider having these waivers reviewed to make sure they are enforceable. If not, consider adding such waivers, after consultation with counsel.
  • If you do not have existing arbitration agreements, determine whether such agreements, with class and collective action waivers, would be good for your business as a way to manage the risk of employment claims. We can advise you on these matters.
  • If you only have an arbitration provision in your employee handbook, and no separate arbitration agreement signed by the company and the employee, the arbitration provision in your employee handbook is probably not enforceable because it is only a policy and not a contract. We can help you with drafting an enforceable arbitration agreement with a class/collective action waiver.