U.S. Supreme Court Upholds Arbitration Agreements For Employees

In a much anticipated ruling, the United States Supreme Court announced today that employers may utilize class action waivers.  This means that employers may require their workforce, as a condition of employment, to sign agreements mandating that they arbitrate any work-related disputes rather than file private lawsuits or join in class action claims.

Legal experts were not sure how this decision would fall, so this is viewed as a major victory for thousands of companies that require their employees to sign arbitration agreements as a condition of employment.

What Was At Stake

Arbitration agreements present many benefits to employers. Arbitrations are usually resolved more quickly and are more streamlined than court proceedings.  They also are private, which prevents the release of damaging information or unflattering characterizations of the company.  Arbitrations also allow employers to avoid trials in front of juries, the majority of whom tend to favor employees.

Our newest Supreme Court Justice, Neil Gorsuch wrote for the majority, in a 5-4 ruling that actually decided three consolidated cases.  Justice Gorsuch wrote that the Federal Arbitration Act sets a strong policy favoring enforcement of arbitration agreements.

The National Labor Relations Board, joined by employee advocates, argued that barring employees from joining together violates the rights of employees to engage in “concerted activity”, a right protected under the National Labor Relations Act (NLRA).  The Court disagreed, writing that that the Federal Arbitration Act (FAA) sets a strong policy favoring the enforcement of arbitration agreements and that Congress did not intend the NLRA to preclude enforcement of arbitration agreements.

Bottom Line

What does this mean for employers?  We can expect more employers to consider the benefits of requiring arbitration agreements as a condition of employment.  These agreements can help streamline dispute resolution and prevent the procedural nightmares and massive liability exposure that class actions often pose.