A sharply divided Supreme Court ruled Monday that arbitration clauses in employment contracts can prevent workers from pursuing class-action lawsuits on minimum wage and overtime disputes, prompting some justices to call for congressional action to protect workers’ rights.
In the 5-4 opinion, the conservative justices sided with corporate interests to find that Congress, in a 1925 law, instructed federal courts to enforce arbitration agreements according to their own terms. That includes terms that require individual — and not class — proceedings.
“This Court is not free to substitute its preferred economic policies for those chosen by the people’s representatives,” Justice Neil Gorsuch wrote for the majority. “The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”
The ruling could affect approximately 25 million employees who have prohibitions against such class-action claims in their employment agreements, an attorney told the justices during oral arguments in October.
Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. joined the majority opinion.
The court’s liberal wing called the majority opinion “egregiously wrong,” arguing that Congress hadn’t dictated the result and suggested a law to allow workers to act in concert with the ruling “is urgently in order.”
“The inevitable result of today’s decision will be the under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers,” Justice Ruth Bader Ginsburg wrote in the dissent. “If employers can stave off collective employment litigation aimed at obtaining redress for wage and hours infractions, the enforcement gap is almost certain to widen.”
The minority opinion argued that the 1925 law does not prevent workers from taking concerted action in the face of arbitration agreements in “take-it-or-leave-it labor contracts.”
“If these untoward consequences stemmed from legislative choices, I would be obliged to accede to them,” Ginsburg wrote. “But the edict that employees with wage and hours claims may seek relief only one-by-one does not come from Congress.”
Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan joined the dissent.
Gorsuch responded for the majority by pointing out that the justices did nothing to override Congress’ policy decisions. He wrote that the issue was best left to “policymakers in the political branches where these questions remain hotly contested,” and cited action last year in this area.
“Just recently, for example, one federal agency banned individualized arbitration agreements it blamed for under-enforcement of certain laws, only to see Congress respond by immediately repealing that rule,” Gorsuch wrote.
The case highlighted the Trump administration’s influence on the current Supreme Court term. The Justice Department flipped its position in the case after President Donald Trump was elected and argued that the businesses should win.
In an unusual twist that put the federal government on both sides, an attorney for the National Labor Relations Board defended the board’s decision that the required arbitration agreements interfered with the workers’ legal rights.
Christine Owens, executive director of the National Employment Law Project, said Monday that companies that use forced arbitration and “class waiver” clauses know that individual workers face enormous barriers if they have to bring their claims alone.
“Very few workers are willing to take on their employer by themselves and risk termination, abuse, or worse,” Owens said in a news release. “Few workers can afford to spend thousands of dollars to pursue an individual case. Collective and class actions exist for this very reason, so that regular people can pool their claims and get a lawyer to pursue their case.”
Gregory Jacob, a Labor Department solicitor in the George W. Bush administration, said most employers expected this decision and individualized arbitration provisions were already inserted into employment agreements.
“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,” said Jacob, a partner at O’Melveny & Myers law firm.
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