Enforceability of employer arbitration agreements in the US

Brian Jebb

The United States Supreme Court recently delivered a landmark decision in Epic Systems Corp. v. Lewis that may give employers more comfort when using arbitration agreements to resolve workplace disputes. The Court held that the Federal Arbitration Act (FAA) requires federal courts to enforce arbitration agreements with class and collective action waivers, and also that employees cannot avoid the terms in their arbitration agreements by seeking to resolve workplace disputes through class and collective action litigation. Critics of this decision may argue that depriving employees of their right to act collectively harms vulnerable workers. Nonetheless, supporters of this decision may argue that the Court’s ruling is in line with Congress’ intention to preserve an arbitration process that serves as a more efficient and cost effective alternative to litigation.

Since the early 1990s, arbitration agreements have become far more common in US workplaces. Unlike class and collective actions, which aggregate the claims of many plaintiffs, individual proceedings in arbitration usually do not pose an enormous financial risk to the employer. However, in recent years, employees have claimed that arbitration agreements were unlawful and violated the rights of employees to bargain collectively. With this recent decision, the Court has clarified the matter, holding that in the absence of an explicit congressional intention to repeal the FAA, its provisions should continue to co-exist with other US laws.

Comments published on Employment Talk do not necessarily reflect the views of Allen & Overy.

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