Arbitration Clauses in Labor Contracts: Renouncing Class Actions is Legitimate


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Arbitration Clauses in Labor Contracts:...

On May 21, 2018 The Supreme Court of the United States established a relevant principle in terms of hourly compensation in labor contracts and alternative conflict resolution in Epic System Corp. v. Lewis.

The court confirmed the legitimacy of inserting an arbitration clause that bars employees under collective contracts from filing a class action lawsuit and permits them only to seek justice in matters of hourly pay compensation.

The Supreme Court reiterated the contents of the Federal Arbitration Act (“FAA”) and pointed out that class action waivers must not conflict with the rules of labor law, which exist already and can be implemented. Class action waivers, according to the justices, are not prohibited by the National Labor Relations Act (NLRA) or by the National Labor Relations Board (NLRB), as was objected by the latter in consideration of the fact that individual workers under collective contract can accept exclusion from the use of class action lawsuits.

The decision represents an extension of the principle already established in American Express v. Italian Colors Restaurant 133 S. Ct. 2304 (2013): if access to justice via arbitration is not limited, renunciation is effective. Epic System will already have immediate consequences for over 25 million labor contracts including all of the arbitration disputes that are currently pending, as well as for future contracts in progress.

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