The United States Supreme Court ruled on May 21, 2018 that employees who sign employment agreements to arbitrate claims must do so on an individual basis, and may not band together to enforce claims through class or collective actions. The opinion, penned by recently appointed Justice Neil M. Gorsuch, cites federal statute and precedent favoring arbitration for its “speed and simplicity and inexpensiveness,” which would be lost by allowing litigants to join claims into class actions either in court or within the arbitration process.
The Court considered three cases regarding whether class action waivers in private arbitration agreements contravene protections for “concerted activities” within the National Labor Relations Act (NLRA) related to underlying Fair Labor Standards Act (FLSA) claims in the matters of Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307.
The Court was split, with Justice Ruth Bader Ginsburg writing on behalf of the four dissenting justices that the majority opinion was “egregiously wrong” and would result in the “under-enforcement of federal and state statutes designed to advance the wellbeing of vulnerable workers.”
The Court’s opinion may be considered an extension of recent rulings allowing companies doing business with consumers to require arbitration and forbid class actions in their contracts. However, there was a split among courts throughout the country regarding whether the same analysis applied to employment agreements. The Court determined that neither the Federal Arbitration Act nor the NLRA rendered the class action waivers within the respective companies’ arbitration agreements unlawful, paving the way for large and small private employers to consider adding binding arbitration agreements with class or collective action waivers for their workforce.