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Supreme Court Upholds Mandatory Employment Arbitration Clauses, Even Those Prohibiting Class Action Proceedings

In a major victory for employers, the Supreme Court of the United States has ruled that individualized arbitration clauses in employment contracts are enforceable.

In Epic Systems Corp. v. Lewis, the Supreme Court determined that the Federal Arbitration Act is compatible with, rather than opposed to, other federal statutes such as the National Labor Relations Act. The most recent Justice, Neil Gorsuch, wrote the 5-4 majority opinion. The decision provides that employers can insist on individualized arbitration clauses in their contracts with employees and preclude employees from bringing class or collective actions in court.

The employees in the case had argued that such a result would impair their right to engage in protected collective activity under the National Labor Relations Act. However, the Court found that the Federal Arbitration Act has long required courts to respect arbitration agreements made between two private parties.

Following the Epic decision, employers may be able to require disgruntled workers to pursue private "one-on-one" arbitrations with their employer. This could have a pro-employer impact on the number of employment cases filed in the court system as well as the amount of damages at issue in each case.

If you have questions about whether an arbitration clause could help your workplace avoid employee lawsuits, please contact a member of Coolidge Wall's Labor and Employment Department.

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