Compliance Corner: Arbitration Agreements

Earlier this year, the U.S. Supreme Court ruled in favor of employers that use arbitration agreements that include class action waivers. In the event that an employee believes they have a lawsuit against an employer, this agreement provides that the dispute will be resolved through individual arbitration and never as a collective or class action.

The court ruled 5-4 in Epic Systems Corp. v. Lewis that if workers were allowed to band together to press their claims, “the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace.”

For employers, arbitration is beneficial because it is less expensive and quicker. It is also private and confidential as well as more absolute since there are fewer avenues to appeal a ruling.

However, the court did explicitly state that legislators could change the status quo, with Justice Neil Gorsuch writing, “The respective merits of class actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches where those questions remain hotly contested.”

Due to this ruling, employers should consult with an attorney and consider adding an arbitration agreement in the onboarding process. However, employers should keep in mind that at some point, the practice could change due to legislation.

Justice Ruth Bader Ginsberg in her dissent called for the U.S. Congress to act, writing, “The inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

Before the ruling, the Ending Force Arbitration of Sexual Harassment Act of 2017 was introduced to the Senate; however, at this point, Congress has yet to take action.

Post by Nicole Fuqua