26 JULY / AUGUST 2018 HUMAN RESOURCES Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. Class-Action Waivers Enforceable for employment-related claims An arbitration agreement is a contract through which parties agree to resolve any disputes that may arise in the future through arbitration, rather than in court. A class-action waiver is a provision in an arbitration agreement requiring claims to be arbitrated individually, rather than as a collective or class action. On May 21 the U.S. Supreme Court, in Epic Systems Corp. v. Lewis, settled a longstanding debate over the enforceability of class-action waivers in arbitration agreements with respect to employment-related disputes. The Supreme Court ruled that employers can require employees to arbitrate employment disputes, and waive their right to bring or participate in class- or collective-action litigation. The debate began after the Supreme Court issued a 2011 opinion in AT&T Mobility v. Concepcion, holding that individual arbitration provisions in consumer agreements were enforceable, thereby preventing those consumers from bringing or participating in class-action litigation. Employers then began requiring employees, as a condition of employment, to sign arbitration agreements (or employment agreements with binding arbitration provisions), requiring that all employment-related disputes, including disputes over wages under the Fair Labor Standards Act (FLSA), be resolved through arbitration, and further mandating that the claims be resolved on an individual basis (waiving the right to participate in class or collective actions). The National Labor Relations Board (NLRB) took the position that such class-action waivers violated employees’ substantive rights under the National Labor Relations Act (NLRA) to engage in protected concerted activity, and it invalidated such class-action waivers. The federal circuit courts were divided on the issue, with the Seventh Circuit siding with the NLRB. However the Supreme Court has now clarified that employment-related, class-action waivers do not violate the NLRA or the FLSA. This is welcomed relief to employers, because class- or collective-action litigation, particularly wage and hour claims under the FLSA, can be a nightmare. [Note: Arbitration provisions with class-action waivers are also permissible in customer financial agreements for services and products (except residential mortgages). In July 2017 the Consumer Financial Protection Bureau (CFPB) issued a final rule barring financial institutions from including class-action waivers in arbitration agreements with customers (including deposit account agreements and credit card agreements); however, under the authority of the Congressional Review Act, the U.S. House of Representatives promptly adopted a resolution disapproving of the arbitration agreements rule. The resolution was subsequently adopted by the U.S. Senate and signed by President Trump on Nov. 1, 2017. As a result, the CFPB’s arbitration agreements rule has no force or effect and was withdrawn from the Code of Federal Regulations by the CFPB.] Class-action waivers are a powerful risk management tool; however, there are pros and cons to arbitration. The fact that employers can now require arbitration agreements with class-action waivers does not necessar-
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