The Sixth Circuit Holds that Class Action Waivers are Unlawful While the Same Issue is Still Pending at the Supreme Court
In National Labor Relations Board v. Alternative Entertainment, Inc., No. 16-1385 (May 26, 2017), the Sixth Circuit Court (which includes Michigan) in a 2-1 split decision found that an arbitration agreement obliging employees to individually arbitrate their claims violates their right to engage in concerted activity under the National Labor Relations Act (“NLRA”), which includes a right to undertake a class action. Although this decision is consistent with opinions from the Ninth and Seventh Circuit Courts, the Second, Fifth, and Eighth Circuits have all held similar class action waivers to be lawful.
In this case, Alternative Entertainment Inc. (AEI) employees signed an agreement stating: “Disputes … relating to your employment” must, at the election of the employee or the company, be resolved “exclusively through binding arbitration”, and that “you and AEI also agree that a claim may not be arbitrated as a class action, also called ‘representative’ or ‘collective’ actions, and that a claim may not otherwise be consolidated or joined with the claims of others.” The court determined that requiring employees to bring claims in their individual capacity unlawfully restricts the rights of employees to bring claims jointly with others under the NLRA.
This very issue is pending before the Supreme Court of the United States in the consolidated cases Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA, Inc., and Ernst & Young LLP v. Morris. Oral argument is scheduled for October, 2017 and a decision is expected in the first quarter of 2018. In the meantime, employers should review their onboarding documents to determine if they have a class action waiver. If yes, employers should consult with experienced employment law counsel to evaluate whether to modify or remove such waivers before the Supreme Court issues a final decision.