United States: High Court's Arbitration Ruling Provides Sigh Of Relief For Healthcare Employers

Last Updated: August 7 2018
Article by Lariza A. Hebert and Pamela Williams

A few months ago, the Supreme Court ruled in a 5-to-4 decision that class action waivers in employment arbitration agreements do not violate the National Labor Relations Act and are, in fact, fully enforceable. The decision solidifies a practice that has long been utilized by employers—including many of those in the healthcare sector— and effectively blocks the National Labor Relations Board's initiative to invalidate such waivers. What do healthcare employers need to know about the decision in order to best capitalize on the current situation?

How Things Got Started: D.R. Horton

The issue in the Supreme Court case centered on whether a provision in the National Labor Relations Act (NLRA) that restricts employers from interfering with workplace rights conflicts with a provision in the Federal Arbitration Act (FAA) that mandates the liberal enforcement of arbitration clauses in employee contracts. In brief, the FAA encourages employers to engage in private dispute resolution through arbitration; the NLRA protects all employees (not only union members) who engage in "concerted activities" for their "mutual aid or protection."

The discord surfaced in 2012 with the NLRB's decision in D.R. Horton, Inc. when the Board held that an employer violated Section 7 of the NLRA by requiring employees to sign arbitration agreements waiving their rights to pursue class and collective claims in all forums. The next year, a federal appeals court overturned D.R. Horton and freed up employers to return to the common practice of including class waivers in employment arbitration provisions. But other courts took notice, and it wasn't long before further trouble developed.

Federal Courts Of Appeal Weigh In And Create Havoc

In 2016, the 7th Circuit Court of Appeals (which hears cases arising out of Illinois, Indiana, and Wisconsin), disregarded that earlier precedent and struck down mandatory class waivers. The case involved a class action lawsuit in Wisconsin against Epic Systems Corporation, a private healthcare software company. An employee alleged Epic violated federal and state wage and hour law by failing to compensate him and other employees for overtime pay after the company allegedly misclassified their employment status. The employee also claimed that the company's employment arbitration agreement violated the NLRA by depriving the employees of the chance to pursue a collective action.

Epic—like many other employers—required its employees to sign an arbitration agreement that mandated resolution of wage and hour claims on an individual basis, as opposed to pursuing those claims in a class or collective action. The company moved to dismiss the lawsuit and compel arbitration, but the federal court of appeals sided with the NLRB's same decision-making. It held that class and collective action waivers violate Section 7 of the NLRA, ruling that collective or class legal proceedings fit well within the ordinary understanding of "concerted activities."

However, other federal courts of appeal maintained the position that the FAA and NLRA did not conflict with each other and permitted mandatory class waivers, including the 5th Circuit (hearing cases from Texas, Louisiana, and Mississippi), the 2nd Circuit (New York, Connecticut, and Vermont), and the 11th Circuit (Alabama, Georgia, and Florida). Meanwhile, the 9th Circuit Court of Appeals (California, Washington, Arizona, Nevada, Oregon, Hawaii, Idaho, Montana, and Alaska) sided with the NLRB's position and ruled that class waivers were unenforceable, creating a massive circuit split in the country.

Epic petitioned the Supreme Court to take the case in September 2016, arguing that its arbitration waiver was consistent with the NLRA and that the Court should resolve the split. As things stood, employers with multi-state operations often could not maintain consistent policies and practices, and many employers didn't know whether they could legally require class waivers to be signed. The Supreme Court agreed to hear the case and combined it with several of the cases mentioned above.

Supreme Court: FAA And NLRA Are Harmonious, Mandatory Class Waivers Stand

The issue for the Supreme Court to consider boiled down to one question: did employment arbitration agreements containing class and collective action waivers violate the NLRA, or are they permitted by virtue of the FAA?

The Court's May 21 decision ruled that the right to bring a joint, collective, representative, or class-based claim is not considered a "concerted action" as understood and protected by the NLRA, and therefore the labor statute does not bar any agreement requiring arbitration instead of any such claims. The Court opined that the FAA and NLRA do not conflict with each other, and Congress's directions favoring arbitration via the FAA do not conflict with the NLRA's policy of protecting workers' concerted activities for the purpose of collective bargaining or other mutual aid or protection.

In the Court's majority opinion, Justice Neil Gorsuch wrote that "the policy may be debatable, but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written." He continued: "While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the FAA. Because we can easily read Congress' statutes to work in harmony, that is where our duty lies."

What Does This Ruling Mean For Healthcare Employers?

The healthcare industry is particularly susceptible to class and collective actions because there are commonly large groups of workers in the same position who could potentially bring such claims. In fact, the U.S. Department of Labor (USDOL) recently identified healthcare as an industry as having a high average volume of wage and hour violations. Just last fiscal year, the USDOL reported that it investigated 1,288 wage and hour violations in the healthcare industry alone, covering over 15,000 employees, with over $12 million paid by healthcare entities in back wages.

For example, in December 2017, the University of Missouri Health Care was ordered to pay $3.6 million to settle a wage and hour lawsuit over a timekeeping dispute filed by employees. Additionally, a national healthcare services company settled an overtime case for $12 million in a wage and hour lawsuit earlier this year where employees alleged improper overtime pay and meal breaks. These few examples (out of many) reinforce the fact that the healthcare industry is an extremely heavily litigated industry, specifically when it comes to wage and hour collective actions. So what adjustments should you make as a result of this ruling to ensure you are not the next employer swept up in a costly class or collective action?

At a minimum, the Supreme Court's decision should provide you comfort knowing that you may continue to incorporate and enforce mandatory class action waivers in arbitration agreements. Additionally, after the back-and-forth court rulings outlined above, many employers were concerned that a blanket prohibition on class claims may be held enforceable, and, as a result, implemented arbitration agreements that included provisions allowing employees to "opt out." Since this issue has been decided, you can now revisit and revise your agreements accordingly, not necessarily having to rely on such an escape hatch.


Wage and hour collective litigation matters are quite costly for employers, even in situations where the company prevails. The Supreme Court decision has now given healthcare employers the green light to mitigate this risk with a simple revision to their arbitration agreements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Lariza A. Hebert
Similar Articles
Relevancy Powered by MondaqAI
Lewis Roca Rothgerber Christie LLP
McLane Middleton, Professional Association
Ogletree, Deakins, Nash, Smoak & Stewart
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Lewis Roca Rothgerber Christie LLP
McLane Middleton, Professional Association
Ogletree, Deakins, Nash, Smoak & Stewart
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions