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U.S. Supreme Court upholds wage-and-hour arbitration clauses

Here at Mills Shirley LLP, we advise employers about their duties under state and federal wage-and-hour laws. These laws impose specific requirements regarding minimum wage, breaks, overtime, classification of workers as either employees or contractors, and classification of employees as exempt or nonexempt.

In addition to compliance advice, we also defend our employer clients against allegations of wage-and-hour violations, including complaints filed with government agencies and lawsuits.

Employment-contract provisions

If appropriate, we may advise an employer to include binding arbitration clauses in certain employment contracts. Such a provision would require the signing employee to submit any future wage-and-hour complaints to private arbitration, waiving the right to file a complaint with an agency or a suit in court.

In private arbitration, a trained, neutral arbitrator decides the outcome of the dispute, similarly to a judge. The parties are bound by his or her decision.

Using employment contracts with arbitration clauses can protect the employer from exposure to potentially expensive class-action suits in which groups of employees collectively in the same lawsuit allege the same wage-and-hour violations.

Decision friendly to employers

On May 21, in the closely watched decision of Epic Systems v. Lewis, the U.S. Supreme Court affirmed that these individual arbitration clauses are valid, binding and enforceable, including the waiver of the right to bring collective legal action.

The impact of the decision on workers who are unionized may be different, reported the Los Angeles Times, also noting that the question of whether the decision reaches similar clauses concerning anti-discrimination and civil rights claims is not yet clear.

The Times quotes the Wisconsin employer in this case as saying that the decision reasonably balances an employee's right to raise grievances with an employer's right to a "fair forum in which those grievances are addressed."

Conflicting federal laws

The court had to resolve a conflict between the 1925 Federal Arbitration Act or FAA, which recognizes the validity and enforceability of arbitration clauses, and the National Labor Relations Act or NLRA passed a decade later. The NLRA grants employees the right to unite for "other concerted activities for the purpose of collective bargaining or other mutual aid and protection."

The court rejected the argument that the NLRA's right for employees to work together collectively included the right to join in a class action lawsuit against their employer. Instead, the court said that the collective action the NLRA guarantees refers to "the right to organize unions and bargain collectively."

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