Class Action Waivers In Arbitration Agreements: Proceed With Caution

Class action waivers in arbitration agreements exist in a legal gray zone, with the federal appellate courts split on their enforceability. Many employers believe that by forcing employees who sue them to do so only individually, they can avoid the prospect of very large judgements. The Ninth Circuit and Seventh Circuit have held that class action waivers in arbitration agreements violate the National Labor Relations Act (NLRA) and therefore are unenforceable. Three other federal circuit courts  (the Fifth, Second, and Eighth) held that such waivers do not violate the NLRA. Not surprisingly, the parties to two lawsuits are currently vying to have this issue resolved by the U.S. Supreme Court. As many readers may know, an appeal to the U.S. Supreme Court is not automatically accepted by the Court.