Ernst & Young v. Morris

The U.S. Supreme Court ruled today in Epic Systems Corp. v. Lewis, that employment arbitration agreements that bar class actions are enforceable.  The vote was 5 to 4 in upholding the use of arbitration agreements in the workplace.

The plaintiff in the case argued that employees could not waive their rights in an agreement to be a part of a class action to pursue employment claims because this waiver violated the National Labor Relations Act (“NLRA”) because these types of claims are “concerted activities” protected by § 7 of the NLRA.  This section guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . ., and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

The Court disagreed with plaintiff’s reading of § 7, and held: “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. This Court has never read a right to class actions into the NLRA – and for three quarters of a century neither did the National Labor Relations Board.”

In 2011, the Supreme Court issued a decision in AT&T Mobility v. Concepcion, upholding the enforceability of class action waivers in the consumer context, such as with cell phone providers, cable providers or services provided by internet companies.  The plaintiff in Epic Systems argued that the employment context was different because of the rights guaranteed to employees under the NLRA.  While many employers were using arbitration agreements with class action waivers, the ruling in Epic Systems confirms the enforceability of these agreements between employees and employers.

This decision resolves a split in authority between the Ninth Circuit Court of Appeals (Ernst & Young v. Morris), the Fifth Circuit Court of Appeals (National Labor Relations Board v. Murphy Oil USA, Inc.), and the Seventh Circuit Court of Appeals (Epic Systems Corp. v. Lewis).

See my prior post for additional background on the case and impact on California employers.