AR Supreme Court upholds class action waiver even without arbitration clause

Arbitration agreements and class action waivers have been important tools for employers seeking to reduce expenses and exposure in cases filed by employees, but the legal instruments are facing new limits. Congress recently amended the Federal Arbitration Act (FAA) to invalidate provisions that required “predispute” arbitration of sexual harassment claims (in other words, you can no longer compel arbitration of a sexual harassment claim based on an arbitration agreement signed at the commencement of employment). But there’s some good news for Arkansas employers: In April, an Arkansas Supreme Court opinion reinforced the validity of class action waivers under state contract law.

Why class action waivers matter

In March and April 2022 alone, employees in Arkansas filed at least 15 class action lawsuits against employers for wage and hour violations. The average amounts to about two class actions filed in the state every week.

There are a variety of methods to stay in compliance with the Fair Labor Standards Act’s (FLSA) many complicated provisions, including handbook and policy reviews by legal counsel, audits on payroll practices, and internal complaint processes that might alert you to a potential violation. Because FLSA infractions don’t require any proof of intent (though there can be extra penalties for a “willful” violation), even employers that believe they’re following the Act’s requirements may be caught in the equivalent of a very expensive “foot fault,” particularly if a violation is filed as a class action.