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Supreme Court rules on employment contracts

by | Jun 21, 2018 | employment contracts, Firm News |

Employers have used employment contracts to limit employee rights. In a close 5-4 decision last month, the U.S. Supreme Court approved one of these restrictions by ruling that class action waivers in these contacts are valid and enforceable. In other words, employees may waive their right to participate in class action lawsuits against their employers and must take their work-related disputes to arbitration as individuals.

The Court ruled on a workers’ attempt to file a class action lawsuit against an employer for alleged violations of the federal minimum wage law. The employer sought dismissal of this lawsuit because it had it employees agree in their contracts to waive their ability to file collective court actions or class action lawsuits. Under their contracts, they had to resolve any disputes individually in out-of-court arbitration.

Workers looked to the 1935 National Labor Relations Act, which protected employees’ right to take part in collaborative action for their joint assistance or action. The Court relied on another law, the 1925 Federal Arbitration Act, which requires enforcement of arbitration clauses in employment contracts.

The justices also ruled that parties should have the ability to agree to settle disputes through arbitration with an individual employee. The Court’s majority decision diminished the importance of class actions and said that these lawsuits often force employers to settle claims lacking merit.

The four Justices who dissented claimed that these waivers are not reached through agreement between employers and employees but are forced upon a worker as a condition of employment. They also viewed a class action as an important means for employees to seek redress of small claims as a group, which would be unrealistic and expensive for an individual worker.

Workers who are negotiating these contracts should seek legal assistance to assure that these contracts are fair, reasonable and protect their legal rights. A lawyer can help a worker pursue reasonable legal options.