SCOTUS Curbs Employment Class Actions

On Monday, the U.S. Supreme Court ruled that employers may use arbitration agreements to make employees waive their right to sue as a class.

The case pitted two federal laws against each other.

On one hand, the Federal Arbitration Act tells courts to enforce arbitration agreements.

On the other hand, the National Labor Relations Act gives employees the right to form unions, bargain collectively, and engage in “other concerted activities” for their mutual aid or protection. The question was whether “other concerted activities” included the right to sue on behalf of other employees in a class action.

The Court held that the NLRA didn’t speak to class actions at all, and even if it did, it didn’t override firm federal policy favoring arbitration. This predictably followed other cases in which the Court has upheld class waivers in consumer and commercial contracts even when people had no other recourse because it wasn’t worth it to bring their single case. Now employees, too, must arbitrate their cases one by one if they agreed to it.

Four of the nine justices dissented. They pointed out that Congress passed the FAA so that merchants of more equal bargaining power could arbitrate commercial disputes. Most workers, however, don’t have that kind of leverage. Whatever rights they have are worth little if they can sign them away in a take-it-or-leave-it contract.

Be that as it may, expect to see more employers use class waivers in their arbitration agreements.