Companies and their in-house counsel have tried to stem the tide of litigation filed by employees on issues such as wage and hour and workplace discrimination by having them sign mandatory arbitration agreements that contain class action waivers. But in some of the most consequential court cases for in-house lawyers of 2016, judges ruled that these contracts, which once seemed like a safe bet to manage employment cases individually and without litigation, may no longer be viable.
Companies have supported these agreements on the theory that individual arbitration saves both employee and employer time and money in resolving conflicts and keeping resolution private. They argue that individual arbitration is protected by the Federal Arbitration Act. But some employees, as well as the plaintiffs bar and the National Labor Relations Board, see these agreements as unfair and illegal under Section 7 of the National Labor Relations Act, which protects employees’ right to protected concerted activity . The board has brought its own cases to strike down these waivers , and has supported plaintiffs attempting to do the same. Companies from K-Mart Corp. to Applebee’s International Inc. have faced legal scrutiny over the issue.
