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Mandatory Arbitration and Employment Class Action Suits

Mandatory Arbitration and Employment Class Action Suits
Over the last decade employers have increasingly added mandatory individual arbitration clauses to their employment agreements. These clauses require any dispute between the employee and employer to go through arbitration instead of litigation, and prohibit employees from grouping together to pursue litigation as a class. Employers prefer this arrangement in part because arbitration is faster and cheaper than conventional litigation, but workers who have serious grievances against their employers often feel that the clauses are unfair.

Federal law favors arbitration

Employees who try to escape their arbitration agreement with employers face a difficult legal road in courts unless there are technical problems with the contract that might make it otherwise unenforceable. One reason for that is the Federal Arbitration Act (FAA), a law that the U.S. Supreme Court has ruled preempts state laws that would otherwise seek to limit the enforceability of arbitration clauses. The FAA provides that federal and state courts must enforce arbitration agreements unless they are invalid on other contract grounds, such as fraud or unconscionability. The U.S. Supreme Court has interpreted the FAA to essentially override state laws that seek to limit arbitration in certain areas, such as employment contracts. In May its decision in Epic Systems Corp. v. Lewis, No. 16-285 (May 21, 2018), garnered media attention by tossing out California’s judicial precedent that disfavored mandatory individual arbitration clauses in employment contracts. Some have interpreted Epic Systems to mean that employers can escape class action lawsuits for employment disputes simply by requiring all employees to enter into arbitration agreements as a condition of employment. Although the ruling related to a California case, its holding probably will be applied to Nevada cases as well.

Pursuing a remedy within the scope of an arbitration agreement

In a nutshell, the Epic Systems case confirmed that employees cannot simply argue that such clauses are invalid for being unconscionable as a matter of course. The FAA’s protection for arbitration clauses requires employees who want to invalidate their employment contracts to find other reasoning. As such, employees may be limited in their ability to band together to protect their rights. That does not mean that an employee who has signed an arbitration agreement is without legal recourse. Arbitration proceedings can be to the employee’s benefit as well. Arbitration tends to be faster and cheaper than ordinary litigation. Even though arbitration can have downsides, like confidentiality and potential bias among arbitrators who see employers as potential clients, an employee with a legitimate grievance should not hesitate to pursue an action anyway.

Call a Las Vegas attorney to discuss your case

The law firm of Greenman Goldberg Raby Martinez has helped clients in the Las Vegas area recover compensation for over 45 years. If you have concerns about how the arbitration clause in your employment agreement may affect your rights to pursue legal action against your employer, call us today for a free consultation. We’re available at 702-388-4476 or contact us through our website.