Employee-Arbitration Demands Upheld by Supreme Court

WASHINGTON (CN) – In its latest buttressing of corporate arbitration, the U.S. Supreme Court was sharply divided Monday in finding that employees do not have a right to class action relief.

“As a matter of policy these questions are surely debatable,” Justice Neil Gorsuch wrote for the conservative majority. “But as a matter of law the answer is clear.”

Employees of the companies Epic Systems, Ernst & Young and Murphy Oil USA had sought to challenge their arbitration agreements under the National Labor Relations Act, but Gorsuch distinguished the NLRA’s support of union organizing and collective bargaining from the right of employees to bring overtime claims in court.

“This court has never read a right to class actions into the NLRA — and for three quarters of a century neither did the National Labor Relations Board,” the 25-page lead opinion states. “Far from conflicting, the [Federal] Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this court to declare the parties’ agreements unlawful.”

Gorsuch’s opinion was joined in full by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.

Justice Ruth Bader Ginsburg meanwhile called the ruling “egregiously wrong” in a dissent joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

“In the NLRA and its forerunner, the Norris-LaGuardia Act, Congress acted on an acute awareness: For workers striving to gain from their employers decent terms and conditions of employment, there is strength in numbers,” Ginsburg wrote. “A single employee, Congress understood, is disarmed in dealing with an employer. The court today subordinates employee-protective labor legislation to the Arbitration Act. In so doing, the court forgets the labor market imbalance that gave rise to the NLGA and the NLRA, and ignores the destructive consequences of diminishing the right of employees ‘to band together in confronting an employer.’”

Ginsburg said today’s result requires immediate “congressional correction.”

Monday’s ruling comes seven years after the Supreme Court held in Concepcion v. AT&T Corp. that the Arbitration Act pre-empts state laws against unconscionable contracts.

The watershed opinion is referenced repeatedly by Gorsuch.

“In the court’s judgment, the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace,” he wrote. “Of course, Concepcion has its limits. The court recognized that parties remain free to alter arbitration procedures to suit their tastes, and in recent years some parties have sometimes chosen to arbitrate on a classwide basis. But Concepcion’s essential insight remains: courts may not allow a contract defense to reshape traditional individualized arbitration by mandating classwide arbitration procedures without the parties’ consent.”

Gorsuch meanwhile downplayed what he called the “apocalyptic warning” of Ginsburg’s dissent.

“Rather than revive ‘yellow dog’ contracts against union organizing that the NLRA outlawed back in 1935, today’s decision merely declines to read into the NLRA a novel right to class action procedures that the board’s own general counsel disclaimed as recently as 2010,” he wrote. “Instead of overriding Congress’s policy judgments, today’s decision seeks to honor them.”

Gorsuch said the dissent fails to apply the court’s “mountain of precedent” and instead “retreats to policy arguments.”

“The dissent spends page after page relitigating our Arbitration Act precedents, rehashing arguments this court has heard and rejected many times in many cases that no party has asked us to revisit,” he said.

In her focus on congressional intent, Ginsburg said the objective was a simple one: “to afford merchants a speedy and economical means of resolving commercial disputes.”

“Congress never endorsed a policy favoring arbitration where one party sets the terms of an agreement while the other is left to ‘take it or leave it,’” she said.

Richard Reice, a partner at Hoguet Newman who has been closely watching the case, chimed in this afternoon that the majority “has dealt a significant blow to the plaintiffs’ class action bar.”

“Unless overturned by an act of Congress,” Reice warned, “it is foreseeable that employees may routinely be asked to enter into arbitration agreements with their employers.”

Ginsburg called it inevitable that today’s decision will led to “the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

Violations of minimum-wage and overtime laws are already widespread, the dissent continues, pointing to one study that found that low-wage workers in Chicago, New York City and Los Angeles alone “lose nearly $3 billion in legally owed wages each year.”

Ginsburg said that, in addition to the expectation that prohibitive costs will far outweigh potential recoveries, “fear of retaliation may also deter potential claimants from seeking redress alone.”

“If these untoward consequences stemmed from legislative choices, I would be obliged to accede to them,” the dissent concludes. “But the edict that employees with wage and hours claims may seek relief only one-by-one does not come from Congress. It is the result of take-it-or-leave-it labor contracts harking back to the type called ‘yellow dog,’ and of the readiness of this court to enforce those unbargained-for agreements. The FAA demands no such suppression of the right of workers to take concerted action for their ‘mutual aid or protection.’”

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