In a recent appeal before the United States Sixth Circuit, the Court weighed in on an increasingly controversial issue: Whether employers can require employees to agree to a mandatory arbitration provision that requires individual arbitration of employment-related claims, thus forbidding class actions or claims otherwise joined with the claims of others. According to the Sixth Circuit, they may not.
In NLRB v. Alternative Entertainment, Inc., the Sixth Circuit became just the third, along with the Seventh and Ninth Circuits, to find that such mandatory waivers violate the National Labor Relations Act (NLRA) because they interfere with employees’ rights to engage in concerted activity for their mutual aid or protection.
The decision stands in contrast to earlier rulings by the Fifth and Eighth Circuits, which in approving the use of such waivers, reasoned that the NLRA cannot override the Federal Arbitration Act (FAA), which manifests a liberal federal policy favoring arbitration agreements and ensures that arbitration agreements are as enforceable as any other contract.
With the apparent split amongst the Circuits, the U.S. Supreme Court has agreed to review the legality of class waivers and is likely to hear arguments in the fall. Until then, employers should carefully consider any company policy barring employees from pursuing class-action litigations or collective arbitration of work-related claims.
For a copy of the Sixth Circuit's decision, click here.
