On Monday, May 21, 2018, the United States Supreme Court ruled in a 5-to-4 decision that employers may require workers to accept individual arbitration for wage and hour and other workplace disputes rather than banding together to pursue their claims in class actions in federal or state courts. The Court’s decision in Lewis v. Epic Sys. Corp. overturns the position of the National Labor Relations Board (NLRB) and resolves a split among federal courts of appeals. The case is one of the most important employment law cases to be decided by the Supreme Court in the past decade and could affect millions of U.S. workers and their employers.
The majority decision was written by the newest Supreme Court Justice, Justice Neil Gorsuch, who was appointed to the Court by President Trump in April 2017. Justice Gorsuch posed the issue to be decided as follows: Should employers be allowed to insist disputes be handled in one-on-one arbitration, or should employees always be permitted to bring their claims in class or collection actions? Gorsuch conceded that “(a)s a matter of policy, these questions are severely debatable.” His decision then goes on to state: “But, as a matter of law, the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms – including terms providing for individualized proceedings.”
The decision broke along the Court’s conservative-liberal divide, with Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito joining Gorsuch. Justice Ruth Ginsburg wrote a sharply-worded dissenting opinion which included the following passage: “The court today holds enforceable these arm-twisted, take-it-or-leave contracts – including the provisions requiring employees to litigate wage and hour claims only one-by-one. Federal law does not countenance such isolation of employees.” Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan joined in the dissent.
The class waiver issue is one that has vexed employers ever since the NLRB issued a decision in 2012 in case involving home builder D. R. Horton, in which the NLRB ruled that class-waiver provision in employer’s mandatory arbitration policies were unenforceable because such waivers violate workers’ rights to engage in concerted activity under Section 7 of the National Labor Relations Act. By some estimates, nearly 25 million employees in the U. S. work for employers who already had mandatory arbitration / class waiver agreements in place. Now that the enforceability of those agreements has been definitively decided by the Supreme Court, that number is likely to increase significantly within the next few months.