In an article for Full Service Restaurant Magazine published on June 11, 2018, Jacqueline Prats provides insight on last month’s Supreme Court ruling on class action waivers in employee arbitration agreements. The Court’s ruling held that class action waivers are enforceable and employers can prohibit their employees from pursuing class action lawsuits for workplace claims. The decision, which is hailed as a win for employers, could alter employment contracts in the restaurant industry and beyond.
For restaurant employers, wage-and-hour law violations are some of the costliest class action suits they could face as plaintiffs can recover double their unpaid wages plus their attorneys’ fees under the Fair Labor Standards Act (FLSA). In class actions, the damages add up rapidly since plaintiffs join together to share these costs. Consequently, employers began to require employees to sign agreements promising not to take on class action lawsuits against their employer, which is usually carried out by inserting a mandatory arbitration agreement into their employee contract.
Over the last several years, plaintiffs pursuing class actions against their employer argued that the waivers were unenforceable because they violated Sections 7 and 8 of the National Labor Relations Act (NLRA). By the end of last year, there was a split between several Federal Circuit Courts of Appeal on whether the waivers were enforceable. In May 2018, the Supreme Court resolved this split and held that class action waivers are in fact enforceable by employers.
There are multiple key takeaways for employers from the Court’s ruling. First, arbitration can be just as complicated as litigation, involve fees for arbitrators and arbitration associations, and could cause employers to be faced with high administrative fees multiple times for each individual plaintiff. In addition, the ongoing #MeToo and #TimesUp movements have been highly critical of forced arbitration, so requiring employees to sign arbitration agreements with class action waivers could have major public relations consequences.
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