Supreme Court Says Job Contracts Can Include Class Action Waivers

On Monday, the U.S. Supreme Court ruled that employers can bar employees from pursuing class action lawsuits over alleged violations of federal labor laws.

Writing for the 5-4 majority, Justice Neil M. Gorsuch said the 1925 Federal Arbitration Act applies over the National Labor Relations Act and authorizes employers to require employees to sign agreements stating they will pursue claims through arbitration instead of through wage and hour class action lawsuits.

“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,” Gorsuch writes in the opinion. “While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA — much less that it manifested a clear intention to displace the Arbitration Act.”

In January, the Supreme Court granted certiorari to three cases brought against Ernst & Young LLP, Epic Systems Corp. and Murphy Oil USA Inc. which challenged their requirement that workers, as a condition of employment, waive their rights to pursue or join a class action lawsuit.

In each of the three cases, employees of the companies tried to join together to sue their employers, arguing that the amounts they could potentially obtain through individual arbitration were far smaller than the legal fees they would likely have to spend.

The employees argued that their right to pursue collective action was granted by the National Labor Relations Act, while their employers claimed the Federal Arbitration Act allows them to ban their employees from participating in collective legal action.

Employers are increasingly including arbitration clauses in their employment contracts, which they require workers to sign as a condition of their employment. Many employment contracts also include a class action waiver that prohibit workers from pursuing collective action for labor disputes.

These employment contract provisions stack the deck against employees because most employment law claims involve damages that are worth far less than the cost of hiring a lawyer to litigate a worker’s individual claim. Class action lawsuits and collective action lawsuits allow affected workers to spread the cost of litigation and reduce the risk of retaliation in the workplace.

In her dissent, Justice Ruth Bader Ginsburg said that a typical employee of Ernst & Young may spend $200,000 to recover less than $2,000 in unpaid overtime. She also notes that fear of retaliation may deter individual workers from taking legal action against their employers.

Further, Ginsburg expresses concern that, due to the confidential nature of arbitration, arbitration of individual complaints “can give rise to anomalous results.”

“As a result, arbitrators may render conflicting awards in cases involving similarly situated employees–even employees working for the same employer,” Ginsburg writes. “Arbitrators may resolve differently such questions as whether certain jobs are exempt from overtime laws.”

If you believe you are owed unpaid wages from your employer, you can still get help by filing individual lawsuits. Click here to find out if you qualify. If you reside in California, click here to submit your information to a California employment lawyer.

The Employee Class Action Waiver Lawsuits are Epic Systems Corp. v. Lewis, Case No. 16-285; Ernst & Young LLP, et al. v. Stephen Morris, et al., Case No. 16-300; and NLRB v. Murphy Oil USA Inc., Case No. 16-307, in the U.S. Supreme Court.