In one of the most anticipated employment and labor law cases, the Supreme Court ruled in favor of arbitration class action waivers earlier this week (Epic Systems Corp. v Lewis 5/21/2018).  

A class action waiver is a common employment agreement term that employers use to take an employment issue to arbitration rather than court. Its specific purpose is to require disputed issues to be resolved individually in arbitration. For decades this term was legal under the Federal Arbitration Act (FAA). That is until the Obama era National Labor Relations Board (NLRB) found that they may violate the National Labor Relations Act’s (NLRA) right to act collectively against an employer.

The Supreme Court and certain Appeals Courts under them reviewed two cases dealing with wage and hour issues.  One of those cases was the NLRB D.R. Horton case, where the employers and employee agreed to waiving the class action right in an employment agreement.  The other case was similar to the wage and hour case, but on another non-NLRB related issue.  The high court combined both cases into the one case heard and ruled upon by SCOTUS this past Monday.

The NLRB has doggedly kept to their position that employees cannot sign away their right to engage in concerted activity under Section 7 of the NLRB and defended their ruling through the Courts in the D.R. Horton case. This is despite what the FAA says and three federal Appeals Court decisions that say otherwise. However, three other federal Circuit Courts of Appeal have upheld the NLRB’s holding including – most recently Michigan’s own Sixth Circuit Court of Appeals. This split in the Appeals Court brought the issue of whether the NLRA trumped the FAA to the U.S. Supreme Court.

The Supreme Court split 5-4 on this decision. Justice Neil Gorsuch, the newest member of SCOTUS wrote for the majority stating, "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.  Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the National Labor Relations Act (NLRA) suggests otherwise.” 

Justice Gorsuch, arguing the law and holding that the FAA supersedes the NLRA’s Section 7 rights, stated how SCOTUS views the NLRA only as intended to focus on workers’ rights to organize unions and bargain collectively. The NLRA “does not mention class or collective action procedures or even hint at a clear and manifest wish to displace the Arbitration Act.” Further writing Gorsuch stated, “it is unlikely that Congress wished to confer a right to class action or collective actions in Section 7 [of the NLRA], since those procedures were hardly known when the NLRA was adopted in 1935.”

The minority on the court lead by Justice Ruth Bader Ginsburg argued the policy “facts” and expressed their dissent as weakening workers’ strength to counter employer-alleged unlawful conduct.

The decision in this case solidifies employers’ rights to take employment issues to arbitration versus the costlier lawsuit route. 

Other employer advantages deriving and continuing from this decision are:

• The results of individual arbitrations can be kept confidential, unlike court decisions. That means a finding against you will not hit the social media feeds or trade publications.

• The parties select the arbitrator, which means you can ensure that your fact finder is a lawyer or has a background in the industry or type of dispute involved.

• There's no risk of a runaway jury, populated by regular folks who might have an axe to grind and no sense of the value of money.

• The dispute gets resolved quickly, with finality, and with no right to appeal (except in very limited circumstances).

As SCOTUS’s 2017/18 term nears its end, one more important ruling remains. The court will hand down its decision on Janus v. AFSCME that challenges the right of unions to charge workers that choose not to join a union a “fair share” fee instead. Based upon the 5-4 decision in this case, it now looks like the High Court may strike another blow against organized labor.

Sources: National Law Journal.  Justices, Divided, Say Employment Contracts Banning Class Actions Are Lawful 5/21/2018. CDW Update email Kristen Swearingen; Employment Law 360 High Court Blesses Employers’ use of Class Action Waivers; Epic Ruling Clears Path: Arbitration Agreements Can Save Millions in Independent Contractor Misclassification Claims by Todd Lebowitz; USA Today 1/28/2018 Supreme Court may deal major blow to labor unions; USA Today 5/21/2018, Supreme Court backs employers over workers in first of two major labor cases