Updated at 7:08 p.m. ET
In a case involving the rights of tens of millions of private sector employees, the U.S. Supreme Court, by a 5-4 vote, delivered a major blow to workers, ruling for the first time that workers may not band together to challenge violations of federal labor laws.
Writing for the majority, Justice Neil Gorsuch said that the 1925 Federal Arbitration Act trumps the National Labor Relations Act and that employees who sign employment agreements to arbitrate claims must do so on an individual basis — and may not band together to enforce claims of wage and hour violations.
"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. "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. Because we can easily read Congress's statutes to work in harmony, that is where our duty lies."
Justice Ruth Bader Ginsburg, writing for the four dissenters, called the majority opinion "egregiously wrong." She said the 1925 arbitration law came well before federal labor laws and should not cover these "arm-twisted," "take-it-or-leave it" provisions that employers are now insisting on.
She noted that workers' claims are usually small, and many workers fear retaliation. For these reasons, she said, relatively few workers avail themselves of the arbitration option. On the other hand, these problems are largely solved by a class-action suit brought in court on behalf of many employees.
The inevitable result of Monday's decision, she warned, will be huge underenforcement of federal and state laws designed to advance the well-being of vulnerable workers. It is up to Congress, she added, to correct the court's action.
In his oral announcement, Gorsuch took the unusual step of elaborately rebutting Ginsburg's dissent, which is five pages longer than the majority's opinion.
A green light for employers
The ruling came in three cases — potentially involving tens of thousands of nonunion employees — brought against Ernst & Young LLP, Epic Systems Corp. and Murphy Oil USA Inc.
Each required its individual employees, as a condition of employment, to waive their rights to join a class-action suit. In all three cases, employees tried to sue together, maintaining that the amounts they could obtain in individual arbitration were dwarfed by the legal fees they would have to pay. Ginsburg's dissent noted that a typical Ernst & Young employee would likely have to spend $200,000 to recover only about $1,900 in overtime pay.
The employees contended that their right to collective action is guaranteed by the National Labor Relations Act. The employers countered that they are entitled to ban collective legal action under the Federal Arbitration Act, which was enacted in 1925 to reverse the judicial hostility to arbitration at the time.
Employment lawyers were elated. Ron Chapman, who represents management in labor-management disputes, said he expects small and large businesses alike to immediately move to impose these binding arbitration contracts to eliminate the fear of costly class-action verdicts from juries. "It gives employers the green light to eliminate their single largest employment law risk with the stroke of a pen," he said.
Implications for #MeToo
Labor law experts said Monday's decision very likely will present increasing problems for the #MeToo movement, and for other civil rights class actions claiming discrimination based on race, gender and religion. There is no transparency in most binding arbitration agreements, and they often include nondisclosure provisions. What's more, class actions deal with the expense and fear of retaliation problems of solo claims. As Ginsburg put it, "there's safety in numbers."
Yale Law professor Judith Resnik observed that the decision applies to all manner of class actions. "What this says is that when you buy something, use something, or work for someone, that entity can require you to waive your right to use public courts," she noted.
Cornell University labor law professor Angela Cornell expects the number of these litigation waivers to skyrocket now. "What we see is the privatization of our justice system," she said.
A study by the left-leaning Economic Policy Institute shows that 56 percent of nonunion private sector employees are currently subject to mandatory individual arbitration procedures under the 1925 Federal Arbitration Act, which allows employers to bar collective legal actions by employees.
The court's decision means that tens of millions of private nonunion employees will be barred from suing collectively over the terms of their employment.
AUDIE CORNISH, HOST:
Today the U.S. Supreme Court delivered a sweeping victory to American business and an equally sweeping defeat to American workers. The court gave the green light to employers who want to bar their workers from bringing class-action suits in court as a condition of employment. The vote was 5 to 4. NPR legal affairs correspondent Nina Totenberg reports.
NINA TOTENBERG, BYLINE: The conservative majority upheld and extended the growing practice adopted by American businesses, namely requiring workers to agree as a condition of employment not to go to court over wage and hour disputes but to instead submit their claims to binding arbitration individually. Today the justices added that employers may bar class-action suits in court as well. Employment lawyers were elated.
Lawyer Ron Chapman, who represents management in labor-management disputes, said he expects small and large businesses alike to immediately move to impose these binding arbitration contracts in order to eliminate the fear of costly class-action verdicts from juries.
RON CHAPMAN: It gives employers the green light to eliminate their single largest employment law risks with the stroke of a pen.
TOTENBERG: Many workers don't even know that they've waived their rights to go to court as a condition of employment. Indeed, the lead plaintiff in the case was an IT worker at Epic, the giant health care software development company. He got an email notifying all employees that they would be barred from joining any workplace class-action lawsuit. By clicking that they received the notice, it turned out he was agreeing to the contract as a condition of continued employment.
The Epic workers as well as junior accountants at Ernst & Young and employees at a Murphy Oil gas station went to the National Labor Relations Board contending that such class-action bans were a violation of federal law. That law guarantees the rights of workers to engage in activities for the purpose of collective bargaining or any other concerted activities. The NLRB agreed with the workers in 2014, as did the Obama administration Justice Department. But the Trump administration reversed that decision and sided with the employers when the case was argued in the Supreme Court.
Today Trump appointee Neil Gorsuch, writing for the court majority, said that provision of the 1935 Labor Act that the workers rested their case on is clearly trumped by the Federal Arbitration Act that was enacted 10 years earlier. He said that Congress never intended a provision aimed at collective bargaining in the union context to guarantee workers the right to bring class actions in court.
Justice Ruth Bader Ginsburg, in a rare oral dissent from the bench, called out the majority for what she said was an egregiously wrong decision. The court endorses nothing more than an arm twisted, take-it-or-leave-it agreement forced upon employees, she said. She noted that the workers' claims are usually small. Indeed, she noted that the typical Ernst & Young employee would likely have to spend $200,000 to recover only $1,800 in overtime pay.
For this reason, she said, relatively few workers avail themselves of the arbitration option, and many are fearful of retaliation. The inevitable result of today's decision, she added, will be huge under enforcement of federal and state laws designed to advance the well-being of vulnerable workers. It's up to Congress, she said, to correct the court's action now.
Labor law experts said today's decision likely will present increasing problems for the #MeToo movement and for other civil rights class actions claiming discrimination based on race, gender and religion. There's no transparency in most binding arbitration agreements, and they often include non-disclosure provisions. Yale law professor Judith Resnik observes that today's decision applies to all manner of class actions.
JUDITH RESNIK: What this says is that when you buy something, use something or work for someone, that entity can require you to waive your rights to use public courts.
TOTENBERG: Cornell labor law professor Angela Cornell expects the number of these litigation waivers to skyrocket now.
ANGELA CORNELL: What we see is the privatization of our justice system.
TOTENBERG: Nina Totenberg, NPR News, Washington. Transcript provided by NPR, Copyright NPR.