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What is an Employment Arbitration Agreement?

What is an Employment Arbitration Agreement?

PER What is an Employment Arbitration Agreement AUG18Arbitration is commonly used as a form of alternative dispute resolution (ADR). Many companies rather resolve disputes with employees through arbitration instead of costly litigation in court. As employment class action lawsuits have increased in popularity over the years, employers have started requiring their employees sign an arbitration agreement to prevent them from pursuing any legal action against the employer in court regarding issues such as wages and working conditions. Should an employee have a complaint against the company, it will be dealt with by an arbitrator (a neutral third party) instead of a court or jury.

Over the years, the legality of employment arbitration agreements with class action waivers has raised doubts with many individuals. Whereas U.S. Court of Appeals for the Second, Fifth, and Eighth Circuits allowed class action waivers to be included in employment arbitration provisions by employers, the Sixth, Seventh, and Ninth Circuits argued that class action waivers violated employees’ rights under the National Labor Relations Act (NLRA).

Class-Action Suits in Arbitration

On May 21, 2018, the U.S. Supreme Court ruled that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA). This allows companies to include class and collective action waivers in their arbitration agreements without worrying they may be violating the NLRA.

The decision, Epic Systems v. Lewis investigated the exchange between the NLRA and the FAA. The Supreme Court concluded that because Congress didn’t address the arbitration in the NLRA that the NLRA had no grounds for invalidating class action waivers in arbitration agreements.

Seek Professional Guidance

Because the nature of this subject is so complex, it is recommended that you work with a professional and experienced employment agency when preparing or modifying similar agreements.

Professional Employers Resources, Inc. (PER) offers numerous services to ensure your business meets federal and state compliance. For more information, or to get started on your partnership with PER, call us today at 888-599-4991. 


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