Supreme Court Upholds Arbitration Clauses

Employers can use arbitration clauses in employment contracts to prohibit workers from participating in class action lawsuits to challenge workplace policies, according to a ruling by the U.S. Supreme Court issued on ruled on May 21, 2018. The case is EPIC Systems Corp. v. Lewis, (No. 16-285).

The court opinion states in part,

As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.

Supreme Court Arbitration RulingThe court considered three cases involving arbitration clauses that all involved employees seeking to litigate Fair Labor Standards Act (FLSA) claims relating to overtime or minimum wage through class or collective actions in federal court. In every instance, the employee was party to an employment agreement that stipulated the use of individual arbitration proceedings.

In one matter, Ernst & Young LLP v. Morris, a junior accountant entered into an agreement providing that the parties would arbitrate any disputes that might arise between them. After his employment ended, Mr. Morris nonetheless sued his former employer in federal court. He alleged that the firm had misclassified its junior accountants as professional employees and violated the federal Fair Labor Standards Act (FLSA) and California law by paying them salaries without overtime pay.

The employees bringing the three lawsuits in question had argued that the Federal Arbitration Act, which generally requires courts to enforce arbitration agreements as written, removes this obligation under the “saving clause” if an arbitration agreement violates some other federal law.

Click on the link to read the U.S. Supreme Court’s ruling on arbitration clauses in EPIC Systems v. Lewis.

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