Supreme Court Validates Class Action Arbitration Waivers

By: Jessica B. Jackler, Associate

The Supreme Court ruled last Monday that arbitration clauses contained in employment agreements that ban class actions do not violate federal labor laws and are enforceable under the Federal Arbitration Act. The Court held that such contracts can include clauses that force employees to settle disputes individually with an arbitrator.

In the 5-4 ruling in which Justice Neil Gorsuch delivering the opinion of the Court, he wrote that that “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.” “It does not even mention class or collective action procedures,” he said referring to the National Labor Relations Act (NLRA). “It does not even hint at a wish to displace the Arbitration Act — let alone accomplish that much clearly and manifestly, as out precedents demand.”

Justice Ruth Bader Ginsburg issued a dissenting opinion, joined in by others, calling the court’s decision “egregiously wrong.”

The decision settles the divide among the nation’s lower courts.

Practice Pointer: This employer-friendly ruling is sure to impact the workplace. The Seventh Circuit has previously held that such waivers are not enforceable, determining that they violate employees’ rights to engage in protected activity under the NLRA. Because the Supreme Court has issued this contrary ruling, companies located within this Circuit should reconsider including arbitration clauses with class waivers to help safeguard against class actions, which are extremely costly to defend.

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