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SCOTUS to Sort Out Class-Action Waiver Conundrum

On January 13, 2017, the Supreme Court agreed to hear three cases over the legality of class action waivers and compulsory arbitration agreements in the employment context. The specific question at issue before the Court in all three cases is whether the National Labor Relations Act (NLRA), which provides that employees have a right to engage in “concerted activities” for mutual aid or protection, trumps the Federal Arbitration Act (FAA) and its express policy in favor of arbitration. Two of the three cases—Morris v. Ernst & Young, LLP (9th Cir.) and Lewis v. Epic Sys. Corp. (7th Cir.)—determined that arbitration agreements precluding all forms of collective or class actions are unenforceable because they are illegal under the NLRA. The third case—NLRB v. Murphy Oil (5th Cir. 2015)—came to the opposite conclusion, holding that nothing in the NLRA forbids compulsory, individual arbitration.

Nilan Johnson Lewis attorney Pablo Orozco says that while it is unclear how the Supreme Court will ultimately rule on this issue—especially in light of vacant seat and upcoming nomination battles—the simple fact that it has decided to examine the issue is a welcome development for employers, as they look for more definitive clarification. “Employers, just like investors, don’t like uncertainty,” says Orozco. “Soon, we can expect additional guidance and the resolution of a circuit split that forces national employers to comply with inconsistent obligations.” To contact Orozco about this matter as things unfold, email or call 612.305.7729.

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