Murphy Oil:  Use of Employee Arbitration Agreements Affirmed By U.S. Supreme Court

In a welcome decision for California employers, the U.S.  Supreme Court ruled in National Labor Relations Board v. Murphy Oil USA, Inc., by a vote of 5-4, that employers can still require employees to arbitrate their disputes individually, and to waive the right to litigate those disputes through the Court process.

Today’s decision was part of three cases dealing with essentially same question relating to the validity of arbitration agreements in light of increasing legal activity pertaining to both labor rights (under the NLRA) and class action actions that employers are facing.  In Murphy Oil, the Court held that an employee, who had signed an employment agreement that contained an arbitration provision filed a class action lawsuit in federal court, must proceed to individual arbitrations under the Federal Arbitration Act.

It should be no surprise that California is one of three states where mandatory arbitration agreements are most prevalent. According to a study released by the Economic Policy Institute, more than 67 percent of private-sector workplaces in California are covered by mandatory arbitration agreements. Recent cases such as the Dynamex case, explain why employers in California should really consider implementing arbitration agreements as part of their employment practices.

In fact, I recommend that employers in California ensure that their employees sign arbitration agreements at the earliest point possible.   Arbitration agreements are subject to attack if they are unreasonable or unconscionable in any way, companies should hire an attorney’s help to draft an agreement that is both fair and clear to the employee.  For instance, in Murphy Oil, the arbitration agreement required the employer to foot the bill for the arbitration under the American Arbitration Association rules. Although such arbitration fees can be costly, most clients find that the amount of money expended in litigation in state and federal court are significantly higher in comparison to the fees/costs associated with private arbitration.


For an evaluation of your company’s arbitration agreement policy or any employment-related matter, please feel free to contact Sergio H. Parra (