U.S. Supreme Court Sides With Employers Over Class Arbitration Waivers

Originally published by Beth Graham.

The United States Supreme Court has finally decided whether a collective action ban included in an employer’s arbitration agreement is lawful under the National Labor Relations Act (“NLRA”).  In a 5-4 opinion, the nation’s highest court sided with employers and ruled that employees may be required to participate in individual arbitration over wage and other workplace disputes.

The Supreme Court’ majority holding states:

Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.

The question presented to the Supreme Court was:

Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.

The Supreme Court’s opinion resolved a circuit split on the issue in consolidated cases: NLRB v. Murphy Oil USA, No. 16-307 (5th Cir., October 26, 2015), Epic Systems Corp. v. Lewis, No. 16-285 (7th Cir., May 26, 2016), and Ernst & Young, et al. v. Morris, No. 16-300 (9th Cir., August 22, 2016).  Previously, the Seventh and Ninth Circuits both sided with the National Labor Relations Board (“NLRB”) and ruled a class-action ban included in an employment contract violates the NLRA.  In contrast, the Fifth Circuit rejected the NLRB’s efforts to ban collective action arbitration waivers in Murphy Oil.  As most expected, the Supreme Court agreed with the Fifth Circuit’s holding on the issue.

In addition to the majority opinion, Justice Thomas wrote a brief concurrence and Justice Ginsburg offered a lengthy dissent that was joined by Justices Breyer, Sotomayor, and Kagan.  You may read the court’s full opinion online.

Please check back soon for a more detailed blog post regarding this landmark case!

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