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U.S. House Considers Limiting Mandatory Arbitration Agreements

    Client Alerts
  • August 05, 2021

Since the Supreme Court’s 2018 decision in Epic Systems v. Lewis, which deemed class action waivers in employment agreements permissible, employers have increasingly relied upon mandatory arbitration provisions to limit potential exposure to large damage awards in employment cases. This is especially true in the context of class and collective action cases. Last week, U.S. House Democrats reintroduced legislation that seeks to overrule Epic by prohibiting and invalidating employment agreements in which an employee promises not to join, litigate, or support any kind of joint, class, or collective claim relating to an employment dispute. 

If enacted, the Restoring Justice for Workers Act (H.R. 4841) would also prohibit and invalidate pre-dispute arbitration agreements in which employees waive their right to pursue employment related claims in state and federal court in favor of private arbitration. Furthermore, it would prohibit employers from retaliating or threatening to retaliate against employees who refuse to sign such agreements.

The bill also seeks to provide protections to ensure that post-dispute arbitration agreements are truly voluntary and with the employee’s informed consent. As currently written, it would make any post-dispute agreement that requires arbitration invalid and unenforceable unless all of the following criteria are met:

  • The agreement is not mandatory, obtained by coercion or threat of adverse action, or made a condition of employment, work, or any employment-related or work-related privilege or benefit.
  • The employer informs any employee entering into the agreement in writing (with plain language that the employee can understand) that the employer has the right to refuse to enter the agreement without retaliation and the employee’s protections under section 8(a)(6) of the National Labor Relations Act (NLRA).
  • The employee does not sign the agreement until after a 45-day waiting period, beginning on the date the employee receives the final agreement and the required disclosures.
  • The employee entering the agreement affirmatively consents to the agreement in writing.

The bill would also amend the NLRA to prohibit agreements and practices that interfere with employees’ right to engage in concerted activity regarding employment disputes.

The current version of the legislation would allow any employee who is injured by a violation of it to bring a civil action in federal court within two years of the violation or within three years if the violation is willful. Potential damages could include reinstatement, backpay, compensatory and punitive damages, and attorneys’ fees and costs.