The U.S. Supreme Court today ruled that employees can simply insert a clause in a contract to prevent workers from joining class-action lawsuits.
In other words, the Court ruled 5-4 that the Federal Arbitration Act (FAA) of 1925 trumps a law passed by Congress a decade later, the National Labor Relations Act (NLRA) of 1935. The majority said arbitration agreements providing for individualized dispute proceedings must be enforced.
The decision, written by the newest member of the Court, Neil Gorsuch, who was nominated by President Donald Trump, is a major blow to workers who are victims of wage theft, harassment and discrimination.
Class action lawsuits allow individuals to join together to take on well-financed corporate entities. Attorneys typically pay the costs upfront and defer their fees on the promise of payment down the line and a cut of the winnings.
In an era of unprecedented wealth inequality – when 62% of Americans have less than $1,000 in savings – few workers can afford to pay an attorney’s hourly rate and often it isn’t worth it because the damages are too low. Meanwhile, federal courts discourage workers from representing themselves with mind-numbing procedural hurdles and obtuse rules that favor employers.
The majority rejected the argument that class actions are protected by the NLRA, which guarantees employees the right to engage “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
Justice Ruth Bader Ginsburg, who wrote the dissent, recalled the early 1930s when employers required prospective workers to sign “yellow dog contracts” that prohibited them from joining labor unions. The very reason the U.S. Congress passed the NLRA, Ginsburg argues, was to affirm that workers have a fundamental right to join together to advance their common interests.
“Employees’ rights to band together to meet their employers’ superior strength would be worth precious little if employers could condition employment on workers signing away those rights,” Ginsburg wrote.
She also questioned whether employer agreements requiring workers to agree to individually arbitrate work dispute are “genuinely bilateral.” She noted that two parties in the case, Epic Systems Corp. and Ernst & Young, told workers they would lose their jobs if they did not agree to the arbitration clause.
Ginsburg said the NLRA has for more than 65 years safeguarded employees from employer interference when they pursue joint, collective and class suits related to the terms and conditions of their employment. Until now, she added, federal courts have endorsed that view.
So now it’s up to Congress, which can’t seem to pass go, to adopt a law to “fix” Gorsuch’s decision.
The National Labor Relation sBoard first held the maintenance of individual arbitration agreements containing class-action waivers violated the NLRA in 2012. The board has 55 pending cases with allegations employers violated the NLRA by maintaining or enforcing individual arbitration agreements or policies containing class action waivers.
Gorsuch was joined by Chief Justice John G. Roberts, Jr., and Associate Justices Anthony M. Kennedy, Clarence Thomas, and Samuel Alito.
The case is Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA, Inc., No. 16-307 (May 21, 2018)