Employers Win in Supreme Court Mandatory Arbitration Decision

As we noted in a previous post, the Supreme Court has been considering three cases that challenged mandatory arbitration in employment contracts. At odds were the Federal Arbitration Act (FAA), which provides that an agreement to arbitrate a dispute is enforceable and irrevocable, and the National Labor Relations Act (NLRA), which states that employees have the right to work together to protect their rights.

The Supreme Court now has ruled, by a vote of 5-4, that employers can include a clause in their employment contracts that requires employees to individually arbitrate disagreements and waive the right to take claims to court or to participate in collective legal action.The opinionresolved all three cases — Epic Systems Corp. v. LewisErnst & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil USA— that the Court heard together on the first day of its term. The decision is a significant victory for employers, since it will likely reduce the number of claims against them.

In the majority opinion, Justice Neil Gorsuch wrote that “Congress has instructed that arbitration agreements like those before us must be enforced as written.” The majority found nothing in the NLRA suggesting that Congress intended it to displace the FAA. “Respect for Congress as drafter counsels against too easily finding irreconcilable conflicts in its work. More than that, respect for the separation of powers counsels restraint. Allowing judges to pick and choose between statutes risks transforming them from expounders of what the law is into policymakers choosing what the law should be.”

The dissent, led by Justice Ruth Bader Ginsburg, called the decision, “egregiously wrong,” taking the unusual step of reading part of the dissenting opinion from the bench. “The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts — including the provisions requiring employees to litigate wage and hours claims only one-by-one. Federal labor law does not countenance such isolation of employees,” she read. As a result, “it will rarely be worthwhile for individual employees to pursue their own claims, even if they might otherwise be willing to do so. They will also likely fear retaliation if they go it alone.”

The decision highlights the effect of the 2016 presidential election on the judiciary, firmly siding with employers. The Obama administration and National Labor Relations Board had backed workers in the cases. As the Trump administration continues to shape employment law, we invite you to call us with any questions or concerns. We’re happy to help.

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