WASHINGTON—In a decision labor unions are calling a “major blow,” the Supreme Court ruled May 21 that employers can legally force workers to settle all disputes by individual arbitration and prohibit them from filing class-action lawsuits.
The 5-4 decision in Epic Systems Corp. v. Lewis and two other cases (NLRB v. Murphy Oil and Ernst & Young LLP v. Morris) voided a 2012 National Labor Relations Board ruling that federal labor law barred such agreements, because class-action lawsuits by workers qualified as “concerted activities” protected by the National Labor Relations Act.
“Today, the Supreme Court has made it more difficult, if not impossible, for working people to use our legal system to fight against unlawful employer policies like wage theft, unequal pay, and other forms of discrimination,” Service Employees International Union President Mary Kay Henry said in a statement. “No person working in the United States should have to sign away their rights just to have a job.”
The United Food and Commercial Workers said on Twitter that the decision was a “major blow to workers,” denying them the right to “band together to challenge violations of federal labor laws.” American Federation of Musicians Local 802 called it “a massive blow to workers’ ability to sue their employer collectively.”
The decision will also harm women fighting sexual harassment, Christine Owens, executive director of the National Employment Law Project, said in a statement. “Forced arbitration means women have to pursue their claims alone, before a private arbitrator hired by the company, with a low likelihood of success and little chance to appeal.”
A 2017 study by the Economic Policy Institute estimated that 56% of nonunion private-sector employees in the U.S., about 60 million workers, are subject to mandatory arbitration procedures, and 23%, almost 25 million workers, are barred from joining class-action suits. Less than 10% of employers requiredarbitration in the 1990s, it added.
Justice Neal Gorsuch, who wrote the majority opinion, argued that the Arbitration Act of 1925 allowed parties to agreements to specify who was allowed to arbitrate disputes, and that the National Labor Relations Act did not mention class-action suits as a workers’ right. The NLRA’s Section 7, he wrote, “focuses on the right to organize unions and bargain collectively. But it does not express approval or disapproval of arbitration. It does not mention class or collective action procedures. It does not even hint at a wish to displace the Arbitration Act.”
Therefore, he claimed, Congress did not intend to protect class-action suits as a right: “The notion that Section 7 confers a right to class or collective actions seems pretty unlikely when you recall that procedures like that were hardly known when the NLRA was adopted in 1935.”
Justice Clarence Thomas concurred. The Trump administration also advocated for overturning the Obama-era NLRB ruling. Federal appeals courts in the three cases had split on the issue, with two ruling against compulsory arbitration.
In dissent, Justice Ruth Bader Ginsburg argued that class-action suits are an essential tool for workers. “Individually, their claims are small, scarcely of a size warranting the expense of seeking redress alone,” she wrote. “But by joining together with others similarly circumstanced, employees can gain effective redress for wage underpayment commonly experienced.”
Put more simply, an individual worker who got cheated out of $300 in overtime pay could spend more than that on just a first consultation with a lawyer, but a class-action suit against an employer who stiffed 1,000 workers could recover $300,000 plus damages. Compulsory-arbitration agreements, Justice Ginsburg said, were specifically designed “to block such concerted action.”
Workers rights’ are not limited to those specified in the NLRA, she contended. “Is there any reason to suppose that Congress intended to protect employees’’ right to act in concert using only those procedures and forums available in 1935?” she asked. Forcing workers to renounce the right to sue, she argued, qualifies as an unfair labor practice under federal law, because it restrains their rights to collective action.
The majority opinion that compulsory arbitration was a part of employment contracts freely agreed to, Ginsburg continued, ignored the gross imbalance between workers’ and employers’ power. Employees at the Epic Systems health-care software company and the Ernst & Young accounting firm, she wrote, “faced a Hobson’s choice: accept arbitration on their employer’s terms or give up their jobs.” The majority’s “liberty of contract” argument, she claimed, harked back to the pre-New Deal era, when the Court upheld “yellow-dog contracts” in which workers agreed not to join a union.
With federal and state resources to enforce wage and hour laws limited, she added, employers “will no doubt perceive that the cost-benefit balance of underpaying workers tips heavily in favor of skirting legal obligations.”
“The Supreme Court has dramatically tilted the legal system against working people, paving the way for corporations to break workplace laws with impunity,” Christine Owens said. “America’s workers have long understood that when their bosses break the law—whether it’s wage theft, discrimination, or sexual harassment—workers have the right to band together to pursue legal action. Today, this is no longer the case.”