Practice Areas

Should You Require Your Employees to Sign Arbitration Agreements with Class Waivers?

In late May, the Supreme Court upheld the lawfulness of class action waivers in arbitration agreements (Epic Systems Corp. v. Lewis, 584 U.S. ____ (2018)).  This means that employers are free to not only require employees to sign an agreement mandating that all of their employment disputes go to binding, private arbitration rather than courts, but also that employers can include waivers where employees lose their right to bring claims collectively as a class.

The decision in Epic has been touted as a victory for employers.  Now that employers can have an arbitration agreement with a class action waiver (under federal law, at least), does it mean all employers should?  Arbitration has its pros, the most notable being a private forum for the resolution of claims, but arbitration has its cons as well.  Moreover, a pro for one employer might be considered a con for another.  Consider the following pros and cons.

Pros of arbitration

  • Private / confidential process
  • No juries (juries tend to be employee-friendly, overly generous, and unpredictable)
  • Less expensive than litigation in court, but not always the case once arbitrator fees are factored in
  • Faster than litigation in court
  • Less formal process
  • More finality (avenues for appeal are very limited so this could be a con as well)
  • Ability to select arbitrator (or arbitrators, as the case may be)

Cons of arbitration

  • No formal rules of evidence and arbitrators may end up considering evidence that a judge would not consider
  • Arbitrators have a tendency to “split the baby” and may issue an award to give the employee “something” rather than dismiss the case
  • Arbitrator fees can be significant (this can add up if there is a class waiver and an employer has to deal with a multitude of individual claims

Class action waivers might not be a pro either when one considers the cost of defending individual claims.  The considerations are complex.  Therefore, if you’re considering having your employees sign arbitration agreements with, or even without, class action waivers, you should definitely consult with counsel before doing so.