In a much awaited decision, the United States Supreme Court has decided, by a 5-to-4 vote, that employment agreements requiring out-of-court private arbitration of workplace wage disputes, and prohibiting group class lawsuits in court, are valid and enforceable.
More than half of private-sector employers have mandatory arbitration procedures, and 30 percent of these include class action waivers, the Economic Policy Institute, a Washington, D.C. think tank, reported in a study last year. Under typical mandatory arbitration agreements, workers whose rights are violated can’t pursue their claims in court but must submit to one-by-one arbitration procedures that according to the Institute overwhelmingly favor employers.
These agreements are usually presented to employees on a “take it or leave us” basis by their employers.
Trump appointee Neil Gorsuch wrote the majority opinion issued on May 21, joined by Chief Justice John Roberts Jr. and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito Jr. Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan dissented.
The court’s decision overruled an Obama-era decision issued in 2012 by the National Labor Relations Board. In the D.R. Horton case, the Board had decided that employment agreements that require employees to use arbitration for all work-related disputes and prohibited class actions interfered with employees’ right to engage in concerted activities under the National Labor Relations Act (NLRA), and thus were illegal. That decision by the Board had reversed
77 years of contrary precedent. Once in office President Trump sought to nullify the Board’s pro-employee ruling.
The 61-page decision — including a lengthy dissenting opinion — in Epic Systems Corp. v. Lewis came in a trio of cases from three different federal circuit courts of appeals decided jointly. Two of the lower court opinions had ruled in favor of the employees. The cases all involved employee claims for wages under the federal Fair Labor Standards Act (FLSA), and efforts to assert class actions joining other affected employees in the same court case.
The majority held that the Federal Arbitration Act requires courts to enforce agreements to
arbitrate, including the terms of arbitration that the parties — employers and employees — select. The Act declares arbitration agreements to be “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
“The NLRA secures to employees rights to organize unions and bargain collectively,” Justice Gorsuch wrote, “but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. … 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.”
In dissent, Justice Ginsburg wrote that “by joining together with others similarly circumstanced,
employees can gain effective redress for wage underpayment commonly experienced.” She called the majority’s decision “egregiously wrong.” She compared the current employment arbitration agreements to the “yellow-dog” contracts (now illegal) used by employers at the end of the 19th century and the beginning of the 20th requiring employees to agree as a condition of employment not to join labor unions.
In the view of the four dissenting justices, the NLRA’s protection of employees’ rights “to engage in other concerted activities for the purpose of . . . mutual aid or protection” should also protect their right to litigate their wage claims in court as class actions. Any conflict between the Federal Arbitration Act and the National Labor Relations Act should be resolved in favor of the latter, they opined.
In response to the dissenters, Justice Gorsuch, a strict constructionist, called the comparison to “yellow contracts” an “apocalyptic false alarm. … Our decision does nothing to override Congress’s policy judgments. As the dissent recognizes, the legislative policy embodied in the NLRA is aimed at ‘safeguard[ing], first and foremost, workers’ rights to join unions and to engage in collective bargaining.’ Those rights stand every bit as strong today as they did yesterday.”