Supreme Court Backs Employers to Uphold Class-Action Waivers

Supreme CourtThe U.S. Supreme Court on May 21 issued a 5-4 ruling that upheld class-action waivers in arbitration agreements. The decision essentially provides employers the right to insist that labor disputes get resolved on an individual basis instead of allowing workers to band together in class-action lawsuits.

NAHB joined other industry groups in filing an amicus brief in support of the employers.

Specifically, the issue before the Supreme Court was whether mandatory arbitration agreements with individual employees are enforceable under the Federal Arbitration Act where the agreements contain class – or collective-action —waivers, notwithstanding certain provisions of the National Labor Relations Act.

A class-action lawsuit is one in which a group of people with the same or similar injuries caused by the same product or action sue the defendant as a group. A class-action waiver is a contract (or a provision in a contract) that attempts to restrict a person’s right to file a class-action lawsuit.

The court has traditionally favored arbitration and has held that the Federal Arbitration Act provides broad authority to enter into and enforce arbitration agreements.

NAHB policy supports the use of binding arbitration in residential construction contracts and efforts to limit judicial invalidation of reasonable arbitration agreements. While the class-action waiver is common among employment contracts, it can be used for other types of contracts as well, such as construction contracts.

Thus, NAHB had a broader interest in seeing the Supreme Court precedent under the Federal Arbitration Act approving class action waivers reaffirmed.

For more information, contact David Jaffe at 800-368-5242 x8317.

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