On May 21, 2018, the U.S. Supreme Court issued a decision that upheld an arbitration clause requiring employees to arbitrate their claims in lieu of participating in a class action. In issuing its decision, the Supreme Court actually resolved three separate cases, all of which involved employees signing agreements to arbitrate individual employment claims. The representative facts were as follows: an employee attempted to participate in class action litigation under the Fair Labor Standards Act (“FLSA”) despite having signed the arbitration agreement, and the company sought to preclude the employee from the class action based on the arbitration agreement. The Supreme Court thus had to address whether the arbitration agreement prevailed over the employee’s right to participate in a class action.
The Supreme Court’s analysis focused on the interaction of two federal laws: the Federal Arbitration Act (“FAA”) and the National Labor Relations Act (“NLRA”). In years past, these two laws did not appear to be in conflict, and arbitration agreements were generally upheld requiring employees to arbitrate their employment claims. However, in recent years, the National Labor Relations Board (“NLRB”) and some courts had taken the position that such arbitration agreements violated the NLRA because they precluded the employees from participating in concerted activity. In reviewing the two laws at issue, the Supreme Court ultimately found that the interests promoted under the FAA prevailed over the NLRA, and that the arbitration provisions at issue were enforceable.
The significance of this decision goes beyond a clarification of the two federal laws at issue. Many employers have been utilizing arbitration agreements for years, and have attempted to enforce those agreements even in the face of employees pursuing separate litigation. The purpose of using an arbitration agreement is to avoid the expense and time associated with jury trials and class action lawsuits. The Supreme Court’s ruling provides additional support for the enforceability of these arbitration agreements, and therefore extends employers greater latitude to use those agreements. While many commentators are considering the Supreme Court ruling to be a blow to employees’ rights, the reality is that arbitration is most often a more cost effective and faster process for all parties involved. Therefore, employers and employees alike should carefully consider the benefits of these arbitration agreements. Please click here if you have interest in reading the entire opinion.