There may be strength in numbers, but when it comes to arbitration agreements in employment contracts, that number is now down to one. A divided U.S. Supreme Court ruled today that employment agreements which force workers to give up their rights to pursue class action claims are legal. In its 5-4 ruling, the High Court rejected the National Labor Relations Board’s position that class waivers violate federal labor law.
The idea behind class-action lawsuits is that there’s strength in numbers – litigation involving a larger class of plaintiffs alleging the same misconduct by a single entity holds more sway than several individual lawsuits each brought by a single person. The class can share the expense of litigation and have greater bargaining power in settling the case or stating damages at trial.
Already legal in consumer contracts, class-action waivers have been become increasingly popular with employers as a way to prevent employees from joining together with other employees to challenge company practices and work conditions. In this latest action – National Labor Relations Board v. Murphy Oil USA, Inc. – a deep split in the federal circuits on the issue caused the Supreme Court to take up the matter in the form of one consolidated case made up of three cases involving three different employers in three different industries – Ernst & Young (accounting firm – Ernst & Young LLP v. Morris) Epic Systems (software company – Epic Systems Corp. v. Lewis), and Murphy Oil USA (oil company/gas station chain). The original claim centered on a group of Murphy Oil employees who alleged their employer forced them to work off the clock. The group tried to sue Murphy Oil but couldn’t because they had all signed agreements mandating arbitration and waiving their rights to become part of a class.
The National Labor Relations Board (“NLRB”) got involved and argued that forced arbitration provisions and class-action waiver clauses interfere with an employee’s right to band together with other employees under the National Labor Relations Act (“NLRA”) in order to improve working conditions. Specifically, the NLRB said the NLRA gives workers the right to join together “and engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
Justice Neil Gorsuch, writing for the majority, rejected the NLRB’s argument, saying “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”
Employee rights advocates fear today’s ruling will hurt low wage workers the hardest, creating nearly insurmountable barriers to the court system. However, management-side employment defense attorneys argue arbitration is generally more affordable than traditional litigation. More importantly, they say most class-action lawsuits result in big payoffs for attorneys, but not for the employees involved.