Supreme Court hears arguments on whether employers can require employees to waive right to class action lawsuits, and mandate arbitration of disputes

On the first day of its term earlier this month, the Supreme Court took up the very important question of whether employers may require, in employment contracts, that any controversy between the employer and its employees be decided through arbitration, instead of in court. Employers have increasingly been including in written employment contracts a requirement that employees arbitrate any disputes with the company individually, and waive their rights to resolve disputes through class action lawsuits.

This exposes a tension between federal laws — the Federal Arbitration Act on the one hand, and the National Labor Relations Act, which guarantees employees a right to engage in “concerted activities” for “mutual aid or protection.” In the pending cases before the Supreme Court, employers have argued that the Federal Arbitration Act is unequivocal and that contractual arbitration provisions must be enforced. The employers also argue that the National Labor Relations Act does not expressly prohibit waivers of class action lawsuits. The employees in these pending cases and the National Labor Relations Board, however, argue that there is no need for the justices to harmonize the National Labor Relations Act and the Federal Arbitration Act because arbitration agreements cannot be enforced by courts when they are illegal. They argue that the National Labor Relations Act’s reference to the right of employees to engage in “concerted activities” for “mutual aid or protection” has long been interpreted by courts to include the right of employees to pursue joint legal claims, which should include class action lawsuits. Contractual limits on asserting class-action lawsuits, therefore, should be seen as illegal and unenforceable. Twenty-eight amicus curia briefs were filed by non-parties in these cases, suggesting how important this issue is to both employers and employees.

Amy L. Howe of SCOTUSblog.com reports that, during the Supreme Court’s oral arguments on October 2, a majority of the justices appeared inclined to come down on the side of employers, and uphold employment agreements that require an employee to resolve a dispute through individual arbitration, waiving class action lawsuits. Chief Justice Roberts, in a back-and-forth with a law professor representing one of the employees in the case, observed that a decision in favor of the employees would invalidate employment agreements covering 25 million people – a step that several of the justices would be reluctant to take, particularly given the court’s strong support of arbitration in recent years. Justice Breyer, on the other hand, told an attorney representing employers that he did not see a path for the employers to win without “undermining and changing radically” the labor laws that are the “entire heart of the New Deal.” An attorney representing employers was pressed repeatedly by the court’s four more liberal justices to explain how the employers’ position could be reconciled with the National Labor Relations Act, but the attorney argued that the NLRA was only intended to protect collective action in the workplace, and to allow employees to get to a forum in which to raise their grievances with employers. Once an employee arrives at that forum, the attorney argued, the employer can raise any defenses that it may have, such as the fact that the employee had agreed to arbitrate any disputes individually. Justice Kagan pointed out that another federal statute, the Norris-La Guardia Act, in her view bars courts from enforcing any waiver of an employee’s right to concerted activity.
The U.S. Government initially filed a brief with the National Labor Relations Board asking the justices to review these cases, but with the change of administrations, the Government thereafter sided with the employers in briefs and argument. Based on questioning during argument, Ms. Howe of SCOTUSblog believes that employers can be assured of the votes of Justices Roberts, Kennedy and Alito, but the two remaining conservative justices – Thomas and Gorsuch – were silent during oral argument and gave no indication of their thinking. Justice Thomas has voted in favor of a broader reading of the Federal Arbitration Act, however, and Justice Gorsuch generally interpreted arbitration clauses broadly while he was a judge prior to appointment to the Supreme Court. Both sides now wait with anticipation for the Supreme Court’s ruling, which will probably be handed down next spring.

More details of the briefs and oral arguments in these cases may be read at SCOTUSblog.