Employment and Labor

Supreme Court Rules in Favor of Employers in Class Action Arbitration Cases

Supreme Court Rules in Favor of Employers in Class Action Arbitration Cases

In a 5-4 opinion written by Justice Neil Gorsuch, the United States Supreme Court ruled that employers can require employees to waive their right to participate in class action lawsuits. The case was Epic Systems Corp. v. Lewis and the opinion was published on May 21, 2018. 

The Lewis appeal was consolidated with two others: Ernst & Young LLP v. Morris and National Labor Relations board v. Murphy Oil USA, Inc.    In each case, an employee signed an agreement with his/her employer providing that employment disputes would be resolved by arbitration. The agreements further provided that any such arbitration would pertain to that particular employee only, meaning that no class or collective actions could be brought. Despite this language, each employee later filed a class or collective action in federal court for violations of the Fair Labor Standards Act. 

The employees argued that class action waiver provisions violate the National Labor Relations Act because they bar employees from “engaging in the ‘concerted activity’ of pursuing claims as a class or collective action,” and that, consequently, the provisions are unenforceable. Justice Gorsuch, writing for the majority, soundly rejected this argument. The majority held that the Federal Arbitration Act, which states that agreements to arbitrate “shall be valid, irrevocable, and enforceable,” requires enforcement of arbitration agreements “according to their terms – including terms providing for individualized proceedings.” The Court further held that nothing in the National Labor Relations Act conflicted with this requirement of the Federal Arbitration Act. Justice Gorsuch concluded that “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.”   

Justice Ruth Bader Ginsburg wrote a robust dissent, which was joined by Justices Stephen Bryer, Sonia Sotomayor and Elena Kagan. In the dissent, Justice Ginsburg called the majority decision “egregiously wrong” and warned that the “inevitable result” of the decision would be “underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.” She urged congress to pass legislation prohibiting class action waiver provisions.

The decision is a significant victory for employers who wish to reduce the risk of expensive and time-consuming class and collective action lawsuits.