Arbitration Provisions With Class Action Waivers Are Enforceable…Now What? A Guide For Human Resources Professionals And In-House Counsel On The Practical Implications Of This “Epic” Decision

Arbitration word cloud


From Mondaq, Ingrid A. Beattie and Jennifer R. Budof offer guidance following the Supreme Court’s decision to uphold class action waivers in arbitration agreements.  They write:

For employers that already have agreements containing arbitration as the selected means of dispute resolution, the question is whether to now include a class or collective action waiver either by (1) explicitly prohibiting class/collective claims; or (2) explicitly requiring that all claims be brought by employees individually and not jointly. Adding a class action waiver to an existing arbitration provision should not require heavy lifting from a drafting perspective, and doing so is likely an easy decision for many employers.

Whether you include a class waiver or not, now is as good a time as ever to revisit your existing arbitration provision more generally to make sure it (and any added class waiver) will be enforceable generally, as employees often have other avenues they can pursue to void certain contractual provisions (i.e. through unconscionability, fraud, duress or coercion-based arguments). Among other things, arbitration agreements must have certain procedural protections for employees, including making sure that the employee has affirmatively agreed to arbitrate any claims on an individual basis. So, a simple policy in your handbook may not always be sufficient. Having completed that review, you may simply decide to leave things status quo, taking comfort that your arbitration provision is enforceable. But for employers that have not reviewed their arbitration provisions for years, the law and marketplace have evolved over time, and these employers should act to modernize their agreements.

What Factors Should I Consider When Deciding Whether to Adopt an Arbitration Provision with a Class Action Waiver?

For those employers who do not rely on arbitration provisions, now is the time to decide whether to adopt one along with a class action waiver. In making this decision, employers should contemplate the following factors:

  • Pros and cons of arbitrating employment disputes: is arbitration of a dispute always better than going to court? Arbitration has advantages and disadvantages. Among these are cost, privacy, timeline, and ability to appeal a decision. Whether any given factor is a pro or a con will depend on your company and the dispute at issue. Employers should not necessarily assume that individual arbitration is always the best way to go and we strongly recommend that you consult with your employment counsel on this issue.
  • Company culture: what will be the impact on employee morale of injecting arbitration provisions and class action waivers into employee agreements? If imposing a company-wide arbitration/class action waiver requirement will adversely affect your current company culture to the extent where it will end up hurting your bottom line, then perhaps they should be implemented only for employees in certain positions, or not at all.
  • Nature of workplace disputes: are the workplace claims your company typically faces of the sort that often are pursued via class action? For example, potential wage and hour claims will be well-suited to class or collective action. So, if your company employs a large number of non-exempt workers (i.e. eligible for overtime and other protections under wage and hour laws), the value of a class action waiver may outweigh any potential downside.
  • Timing and messaging: if you decide to revise your agreements, when is the best time to do so and how should you communicate this change to current employees? Timing can be important. For example, it may be helpful to roll out agreements containing arbitration provisions and class action waivers when conducting annual code of conduct or other training, in connection with employee handbook distribution, during bonus time, or in the course of annual salary reviews.
  • Market pressures: do other companies in your industry require employees to sign arbitration agreements and class action waivers? This could affect your ability to recruit and retain talent. In addition, do your company’s business partners and clients expect your company to have such agreements in place? Further, will your company suffer a public relations hit by imposing these requirements?

Read the full story at Arbitration Provisions With Class Action Waivers Are Enforceable…Now What? A Guide For Human Resources Professionals And In-House Counsel On The Practical Implications Of This “Epic” Decision

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