This week the US Supreme Court ruled that the National Labor Relations Act (NLRA) does not prohibit enforcement of class action waivers in employment contracts. This means employers will be able to prevent employees from consolidating their claims and having them handled in one proceeding. That is, employers can require each employee to sue or arbitrate separately. This is a huge benefit to employers and a significant problem for employees, who often find that bringing an individual claim is not cost-effective.
Epic Systems Corp. v. Lewis involved consolidated appeals from the Fifth, Seventh and Ninth Circuit Courts of Appeal. In each case, an employee had signed an employment contract with a clause providing that the parties would arbitrate any disputes. The agreements also said that claims pertaining to different employees must be heard in separate proceedings.
In each of the consolidated cases, the employee tried to pursue his or her claims in federal court as a class action, and the employer, relying on the employment contract, attempted to compel individual arbitration.
The employers relied on the Federal Arbitration Act (FAA), which provides that “a written provision in … a contract evidencing a transaction involving commerce” requiring the parties to arbitrate disputes is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
The employees argued that because Section 7 of the NLRA gives employees the right to “self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” class-action waivers of employment claims are unlawful.
This is especially true, the employees contended, since individual claims are frequently in dollar amounts too small to make pursuing them separately worthwhile, and “no group arbitration” clauses, therefore, make it easier for employers to violate employment laws.
The circuit courts hearing these cases split on whether a contract requiring individualized arbitration violates the NLRA by barring employees from engaging in concerted activity.
Writing for a 5-4 majority, Justice Gorsuch opened the court’s opinion with “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?”
He goes on to write that “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.”
Justice Gorsuch noted that the majority sees nothing suggesting that Congress manifested a clear intention for the NLRA to displace the Arbitration Act. “Because we can easily read Congress’s statutes to work in harmony,” he wrote, “that is where our duty lies.”
The court then stated that while the NLRA gives employees rights to organize unions and bargain collectively, it says nothing about the procedures to be used by judges and arbitrators that resolve legal disputes.
The majority opinion also stated that the “other concerted activities” catch-all term must be read in light of the language that preceded it and that language is about collective bargaining, not alternative dispute resolution.
Justice Ruth Bader Ginsburg, author of a dissent joined by Justices Stephen G. Breyer, Sonia Sotomayor, and Elena Kagan, called the majority opinion “egregiously wrong,” and argued that the NLRA’s “other concerted activities” provision does, in fact, apply to class-action waivers, noting, “There can be no serious doubt that collective litigation is one way workers may associate with one another to improve their lot.”
There is a possibility that Congress could revise the law to prohibit these types of waivers. Further, since this is a 5-4 decision, a future court could reconsider it and reach the opposite conclusion.
Please feel free to contact us if you (as an employee or employer) have any questions about the Epic Systems case or if you need any assistance with employment related issues.
