How Could This SCOTUS Decision Affect Employment Contracts?
The U.S. Supreme recently agreed to weigh in on a very hot topic — the enforceability of class-action waivers in employment agreements. The decision will address a circuit split and is expected to impact employment contracts involving millions of workers across the country.The specific question before the Court in National Labor Relations Board v. Murphy Oil USA, Inc. is:
Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.
NLRB’s Position on Class-Action Waivers
Section 7 of the National Labor Relations Act (NLRA) protects employees who engage in “concerted activity,” which is defined acting together to improve the terms and conditions of employment, including their wages, job performance, and staffing levels. Meanwhile, Section 8(a)(1) forbids an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.”
The National Labor Relations Board (NLRB) has taken the position that agreements with individual employees that require them to use individual arbitration for all work-related disputes with their employer interfere with their Section 157 right to engage in concerted activities in violation of the NLRA. In D.R. Horton, Inc., 357 N.L.R.B. 2277, 2278- 2283 (2012), the NLRB first held that although the FAA “generally makes employment-related arbitration agreements judicially enforceable,” when such an agreement violates the NLRA, the FAA does not require its enforcement.
Circuit’s Split on Enforceability
The Fifth Circuit rejected the Board’s analysis in D.R. Horton, holding that the NLRA does not “override” the FAA and that the “use of class action procedures … is not a substantive right” under Section 157. In Murphy Oil, the NLRB reaffirmed its position in D.R. Horton. Again, the Fifth Circuit refused to enforce the board’s ruling.
The Second and Eighth Circuits have also rejected the NLRB’s position. However, the Ninth and Seven Circuits have agreed that class action waivers in employment agreements are unlawful. The Supreme Court will now have the final word.
In addition to Murphy Oil, the justices agreed to hear two other cases involving class-action waivers in employment contracts. They are both private lawsuits alleging that a class action waiver violates the NLRA. Oral arguments have not yet been scheduled for the consolidated cases. We encourage readers to check back for updates.
Are you a New Jersey business owner unsure how this U.S. Supreme Court decision could affect employment contracts? Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Michael Jimenez, at 201-806-3364.
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
SCOTUS Decision to Impact Millions of Employment Contracts
Author: Scarinci Hollenbeck, LLC
How Could This SCOTUS Decision Affect Employment Contracts?
The U.S. Supreme recently agreed to weigh in on a very hot topic — the enforceability of class-action waivers in employment agreements. The decision will address a circuit split and is expected to impact employment contracts involving millions of workers across the country.The specific question before the Court in National Labor Relations Board v. Murphy Oil USA, Inc. is:
Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.
NLRB’s Position on Class-Action Waivers
Section 7 of the National Labor Relations Act (NLRA) protects employees who engage in “concerted activity,” which is defined acting together to improve the terms and conditions of employment, including their wages, job performance, and staffing levels. Meanwhile, Section 8(a)(1) forbids an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.”
The National Labor Relations Board (NLRB) has taken the position that agreements with individual employees that require them to use individual arbitration for all work-related disputes with their employer interfere with their Section 157 right to engage in concerted activities in violation of the NLRA. In D.R. Horton, Inc., 357 N.L.R.B. 2277, 2278- 2283 (2012), the NLRB first held that although the FAA “generally makes employment-related arbitration agreements judicially enforceable,” when such an agreement violates the NLRA, the FAA does not require its enforcement.
Circuit’s Split on Enforceability
The Fifth Circuit rejected the Board’s analysis in D.R. Horton, holding that the NLRA does not “override” the FAA and that the “use of class action procedures … is not a substantive right” under Section 157. In Murphy Oil, the NLRB reaffirmed its position in D.R. Horton. Again, the Fifth Circuit refused to enforce the board’s ruling.
The Second and Eighth Circuits have also rejected the NLRB’s position. However, the Ninth and Seven Circuits have agreed that class action waivers in employment agreements are unlawful. The Supreme Court will now have the final word.
In addition to Murphy Oil, the justices agreed to hear two other cases involving class-action waivers in employment contracts. They are both private lawsuits alleging that a class action waiver violates the NLRA. Oral arguments have not yet been scheduled for the consolidated cases. We encourage readers to check back for updates.
Are you a New Jersey business owner unsure how this U.S. Supreme Court decision could affect employment contracts? Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Michael Jimenez, at 201-806-3364.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
