The United States Supreme Court decided last week to resolve a split in the lower courts as to whether the National Labor Relations Act (“Act”) preempts class-action waiver clauses in arbitration agreements between employers and their employees. This is an important development, as the use of such waivers in arbitration agreements (if permissible) can drastically reduce an employer’s exposure to costly class actions alleging overtime violations, missed meal-and-rest periods, and other types of claims.
A number of courts (including the appellate courts that hear appeals from federal courts in California and Illinois) agreed with the National Labor Relations Board (“Board”) that the Act invalidates those waivers. Meanwhile, three other federal appellate courts rejected the Board’s position. Stepping into the fray, the high court last week decided to review two decisions that agreed with the Board and one that disagreed with the Board; namely, Epic Systems Corp. v. Lewis (No. 16-285), Ernst & Young v. Morris (No. 16-300), and NLRB v. Murphy Oil USA, Inc. (No. 16-307).
The Supreme Court currently has just eight justices after the death last year of Justice Scalia, who authored a significant pro-arbitration opinion in 2011. Without a replacement for Justice Scalia being confirmed by the U.S. Senate, the high court may split 4-4 on the resolution of these three cases, which have been consolidated. Such a result most likely would create confusion rather than clarity as to the state of the law. Accordingly, the issue may not be resolved without a ninth justice on the Supreme Court’s bench.
The takeaway here for employers is that it may be too soon to discard those class-action waivers.