Supreme Court rules that companies can require workers to accept individual arbitration

  • The Supreme Court is seen in Washington, April 20, 2018. The Supreme Court says employers can prohibit their workers from banding together to complain about pay and conditions in the workplace. (AP Photo/J. Scott Applewhite) J. Scott Applewhite

Washington Post
Published: 5/21/2018 10:48:52 PM

Supreme Court rules that companies can require workers to accept individual arbitration

An ideologically divided Supreme Court ruled Monday that companies may require workers to settle employment disputes through individual arbitration rather than joining to press their complaints, a decision affecting as many as 25 million workers.

The court’s conservative majority said that the 5-4 ruling was a logical reading of federal law and Congress’s preference for using arbitration to avoid costly and time-consuming litigation.

But the decision, involving a wage dispute, was roundly criticized on the left, and advocates said it could make it harder to press other workplace complaints such as discrimination and sexual harassment.

“Employees may now be forced behind closed doors into an individual, costly – and often secret – arbitration process,” said Fatima Goss Graves, president and CEO of the National Women’s Law Center. “This will stack the deck in favor of the employer.”

The decision also underscored the importance of the 2016 presidential election on the judiciary. The Obama administration and the National Labor Relations Board had backed workers in the cases, but after President Donald Trump was elected, the Justice Department threw its support to the employers.

And the ruling was written by Trump’s nominee to the court, Justice Neil Gorsuch. It is far more likely that the 5-4 decision would have gone the other way if President Barack Obama’s nominee to the court, Judge Merrick Garland, had been confirmed.

The decision came in what is considered the most important business case of the term. It expands upon recent Supreme Court decisions that permit corporations to avoid class-action lawsuits from consumers by enforcing contracts that call for individual arbitration.

Gorsuch, writing for the conservative majority, outlined the question presented by this case: Should employers be allowed to insist that workplace disputes be handled in one-on-one arbitration, or should employees always have an option of bringing claims in collective actions?

“As a matter of policy these questions are surely debatable,” Gorsuch wrote. “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.”

Gorsuch was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.

Workers had contended that another federal law, the National Labor Relations Act, makes illegal any contract that denies employees the right to engage in “concerted activities” for the purpose of “mutual aid and protection.” That means that some sort of collective action cannot be prohibited, the workers say.

That was the thrust of a forceful dissent from Justice Ruth Bader Ginsburg, who called the decision “egregiously wrong” and underlined her objections by reading part of her dissent from the bench.

“The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts – including the provisions requiring employees to litigate wage and hours claims only one-by-one,” she said. “Federal labor law does not countenance such isolation of employees.”

Trying to arbitrate such claims individually would be too expensive to be worth it, she wrote, and “the risks of employer retaliation would likely dissuade most workers from seeking redress alone.”

She was joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

The cases involve non-unionized workers, but labor leaders said it was representative of how the court sides with business over workers.

“Five justices on the Supreme Court decided that it is acceptable for working people to have our legal rights taken away by corporations in order to keep our jobs,” AFL-CIO President Richard Trumka said.

Unions are bracing for another Supreme Court case yet to be decided, which could forbid public employee unions from collecting fees from nonmembers to cover the cost of contract negotiations.

Arbitration contracts are a growing trend. Ginsburg wrote in her dissent that only 2.1 percent of non-ununionized companies imposed mandatory arbitration agreements on their employees in 1992, but nearly 54 percent do now.

She took exception to Gorsuch’s description that workers had “agreed” to abide by one-to-one arbitration.

One of the companies, Epic Systems Corp., emailed its employees the arbitration agreement and said that if they continued to work at the company, they would be “deemed” as having accepted the terms.

Hours after the decision, one law firm, Ogletree Deakins, announced an “automated tool that quickly prepares custom arbitration agreements with class action waivers based on employers’ requirements and preferences.”

But Gregory Jacob, a Washington lawyer who previously served in the Labor Department, said the business community was not waiting on a go-ahead from the Supreme Court.

“Most employers expected this decision, and did not hesitate where desired to insert individualized arbitration provisions into employment agreements,” he said in a statement. “This decision thus will not see a huge increase in the use of such provisions, but it does protect employers’ settled expectations and avoids placing our nation’s job providers under the threat of additional burdensome litigation drain.”

The decision was one of the most impactful of Gorsuch’s fledgling career on the court. Gorsuch, 50, engaged in a point-by-point debate with Ginsburg, 85, who wore the collar she has said she favors when delivering a meaningful dissent.

“As I see it, in relatively recent years, the court’s Arbitration Act decisions have taken many wrong turns,” Ginsburg wrote. “Yet, even accepting the court’s decisions as they are, nothing compels the destructive result the court reaches today.”

Suits to enforce workplace rights collectively “fit comfortably” under the National Labor Relations Act promises, she said.

Without them, the “inevitable result” of the decision “will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers,” she wrote.

Gorsuch said Ginsburg’s dissent “even suggests we have resurrected the long-dead ‘yellow dog’ contract,” in which employers attempted to forbid employees from joining unions.

“But like most apocalyptic warning, this one proves a false alarm,” Gorsuch wrote.

Ginsburg’s objections are to policy, he said, but those are not decisions for judges to make but the policymakers in the political branches where those questions remain hotly contested,” Gorsuch said.

While the decision was largely supported by the business community, some Democrats in Congress said the ruling was a call for action.

The combined cases are EPIC Systems Corp. v. Lewis, Ernst & Young v. Morris and NLRB v. Murphy Oil.

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