Employers Hold Their Collective Breath on the Enforceability of “Class Action” Waivers in Arbitration Agreements
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The Supreme Court is currently set to answer the question of whether employees must be permitted, if they choose, to pursue relief collectively in an arbitration proceeding. Is that “concerted activity” that is protected by the National Labor Relations Act, and does that statutory provision supervene the provisions of the Federal Arbitration Act and the right to contract freely? And specifically, is a waiver of class actions in an arbitration clause in an employment agreement enforceable?
(That of course skips the fundamental question of whether a “class action” mechanism, as it is understood in judicial litigation, is legally compatible with a commercial arbitration. But that is the subject of another posting to come.)
The Federal Arbitration Act (“FAA”) among other things protects the enforceability of arbitration agreements. Generally, applying ordinary contract law principles, it requires courts to enforce such agreements unless (a) a federal statute specifically overrides the right to contract freely or (b) enforcement of such an agreement would impinge upon a “substantive right” afforded to an individual by statute. The National Labor Relations Act (“NLRA”), among other things, protects workers’ rights to act together in certain “concerted activity.”
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