United States Supreme Court: Arbitration Agreements May Waive Employees’ Rights to Bring Class Actions

Types : Alerts

In a 5-4 decision, the U.S. Supreme Court held that arbitration agreements between employees and employers waiving employees’ rights to bring class actions are enforceable under the Federal Arbitration Act (FAA).  (Epic Systems Corp. v. Lewis, May 21, 2018.)  This decision is considered to be a significant victory for employers because of the potential expense in defending class action lawsuits.

The employees argued that arbitration agreements barring class actions were unlawful because the National Labor Relations Act (NLRA) protects employees’ rights of self-organization, collective bargaining, and “other concerted activities for…mutual aid or protection.”  Justice Neil Gorsuch, writing for the majority, rejected this argument, ruling that the NLRA does not displace the FAA.  Instead, the Court held that arbitration agreements between employees and employers providing for only individualized proceedings are enforceable under the Federal Arbitration Act.

In a dissent joined by Justices Breyer, Sotomayor, and Kagan, Justice Ruth Bader Ginsburg wrote that the Court’s decision is “egregiously wrong” because the Court’s ruling (1) “subordinates employee-protective labor legislation” to the FAA; (2) forgets the labor market imbalances which led to the NLRA; and (3) “ignores the destructive consequences” of lessening the rights of employees to join together against their employer.  Justice Ginsburg urged Congress to correct the decision through legislative action.