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Class Waivers Declared Legal: What's Next For Plaintiffs?

Law360—Vin Gurrieri

Although employers scored a landmark win Monday when the U.S. Supreme Court ruled that workers can be barred from pursuing class claims, the decision could prove to be a double-edged sword, since businesses face the prospect of footing the bill for an avalanche of individual arbitration demands workers may file. Here's a look at how plaintiffs will forge ahead now that the ruling is on the books.

A five-justice majority led by Justice Neil Gorsuch ruled that businesses aren't violating the National Labor Relations Act by including class waivers in arbitration agreements that workers must sign as a condition of employment. Instead, the justices held that mandatory arbitration agreements must be enforced under the Federal Arbitration Act according to their terms, even if those terms include individual arbitration.

Attorneys on both sides of the bar have acknowledged that the hotly anticipated ruling will go down as a landmark decision in the annals of employment law and is likely to turbo-charge employers’ use of class waivers in arbitration agreements.

But even if class waivers become more ubiquitous, plaintiffs-side attorneys say they have already been dealing with the steadily expanding use of such waivers in recent years and have a number of tools at their disposal to work around such provisions.

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Even before the high court issued its ruling in Epic Systems Corp. v. Lewis, the number of employees covered by arbitration agreements had been on the rise.

In September, the Economic Policy Institute released a study finding that 56 percent of private-sector nonunion workers — about 60 million people — were subject to mandatory arbitration in employment contracts that prevent them from pursuing claims in court. Among companies with 1,000 or more employees, about 65 percent of them have mandatory arbitration procedures, according to the study conducted by Cornell University professor Alexander J.S. Colvin.

Colvin's study found that about 30 percent of the employers that require mandatory arbitration include class action waivers as part of their policies, with large employers being more likely to include them than smaller ones.

Overall, that means about 23 percent of the nonunionized private workforce — nearly 25 million people — have waived the right to pursue class or collective actions against their employers.

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In the context of arbitration, that means an employer can hypothetically win the first few arbitration cases brought by workers over a particular issue but still face the prospect of losing one of the proceedings.

Workers who subsequently file an arbitration demand with a similar claim can potentially try to use that adverse ruling to their advantage and argue to the arbitrator that the issue was already litigated and decided against the employer.

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But more broadly, Rachel Bien, co-leader of Outten & Golden LLP’s class and collective action practice, said that employers post-Epic will have to weigh the risk of whether to adopt class waivers at all.

“We have seen class waivers for several years, so practically, I don’t think this decision will make a huge difference,” Bien said. “However, given the public’s clear aversion to forced arbitration and class waivers, companies that have not adopted forced arbitration — and even those that have — should be wary about doing so or else face the real risk that consumers and workers will go elsewhere.”

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