In a case involving the rights of tens of millions of employees in the private sector, the U.S. Supreme Court delivered a severe blow to workers in May, ruling that companies can use arbitration clauses in employment contracts to prohibit employees from banding together to challenge violations of federal labor laws.
The vote was 5 to 4, Trump-nominated Justice Neil Gorsuch and four other conservative justices wrote the ruling. Writing for the majority, Gorsuch said that the 1925 Federal Arbitration Act supersedes the National Labor Relations Act, stating that employees who sign employment agreements to arbitrate claims are required to do so on an individual basis—and not band together to enforce wage and hour-violation claims.
Simply put, if an employee has a claim against his/her employer, he/she must go into private arbitration. In general, the employer chooses an arbitrator to come in and act as a neutral party, hearing the employee’s claim and making a decision. In the end, employees are bound by the arbitrator’s decision.
The ruling came in three cases brought against Ernst & Young LLP, Epic Systems Corp., and Murphy Oil USA Inc. As a condition of employment, each company made it mandatory for their employees to waive their rights to join a class-action suit. In all three cases, workers attempted to sue together, arguing that the amounts they could recover in individual arbitration were diminished by the legal fees they are required to pay.
Justice Ruth Bader Ginsburg, writing for the four dissenters, vehemently disagreed with the ruling. She said the result of the decision “will be huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”
Roughly 25 million workers in the United States are under these arbitration agreements that include bans on class action lawsuits. Although the cases involved wage disputes, the potential repercussions of the court’s decision on class action discrimination and other civil rights claims are yet to be known.