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Law Alert: Supreme Court Allows Class Waivers in Arbitration

by Braden K. Core, Gregory M. Feary, Brandon K. Wiseman, Ryan W. Wright

May 22, 2018

 

Supreme Court Rules that Class-Action and Collective-Action Waivers in Arbitration Agreements Do Not Violate the NLRA


This morning the U.S. Supreme Court ruled in a 5-to-4 decision that a waiver in an arbitration agreement of a plaintiff’s right to bring class-action and collective-action claims does not violate the National Labor Relations Act. This result clears the way for transportation companies to continue exploring arbitration as a means of resolving disputes with their employee workforces, providing the arbitration agreements they implement are enforceable under applicable federal and state law.

In Epic Systems Corp. v. Lewis, the Court rejected the National Labor Relations Board’s position, adopted during the prior Administration, that such waivers violate employees’ rights to engage in concerted activities under the NLRA. Three circuit courts (the Sixth, Seventh and Ninth) had agreed with that position, while other circuits courts had rejected it, and still others had not weighed in on the question at all. Thus, while today’s decision is important, it only changes the law in three circuits, and even then essentially returns it to the “status quo” before the NRLB gave life to this line of attack on such waivers. (It is worth noting that the U.S. Department of Justice originally sided with the NLRB but then changed its position under the new Administration, which the Court cited as a reason not to defer to the NLRB’s view.)

While this development is good news for companies in the transportation industry, Epic Systems does not address the exemption from the Federal Arbitration Act for “contracts of employment” with “transportation workers.” As discussed in our Transportation Law Alert dated March 6, 2018, the Supreme Court has agreed to review an opinion issued by the First Circuit in a case called New Prime directly addressing that exemption. While Epic Systems may garner more publicity because it applies to all arbitration agreements regardless of the industry at issue, New Prime could have a relatively greater impact on the ability of transportation companies to enforce arbitration agreements with owner-operators. For this reason, we are closely watching New Prime and will continue to keep you informed of significant developments in that case.

Epic Systems, New Prime and cases like them underscore the need for transportation providers to look closely at state law as an alternative means of compelling arbitration of disputes with owner-operators. Lease agreements with owner-operators that are found to be exempt under the FAA may nonetheless be enforced under state law. While those laws vary by jurisdiction and require careful study, they can provide an independent avenue by which a court could send a dispute to arbitration, rendering moot any question as to whether the FAA applies.

Scopelitis attorneys regularly counsel transportation companies on the risks involved in requiring arbitration with owner-operators under the FAA and the possibility of gaining enforcement of such agreements under state law. If you have any questions along these lines, please contact Greg Feary, Braden Core, Ryan Wright, or Brandon Wiseman.

 

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Scopelitis Transportation Law Alerts are intended as a report to our clients and friends on legal developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

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