Businesses Win Under Supreme Court Decision to Limit Workers in Arbitration Cases

May 23, 2018

Learn how the new Supreme Court ruling involving the NAA and NLRA may impact employee's arbitration cases involving your business.

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Monday, in a 5 to 4 vote, the Supreme Court ruled in favor of businesses by giving them the power to block employees from banding together to bring class action suits against employers accused of wage theft and other workplace-related conditions and violations. Now, each case must go through arbitration individually for resolution. The decision reverses an Obama-era position and could affect an estimated 25 million employment contracts that require arbitration to resolve disputes. With this clarification, some expect employers to impose such restrictions on millions of more contracts. The ruling does not impact union members.


The ruling is a result of the court reconciling federal statutes that potentially conflict with one another. At issue are the Federal Arbitration Act (FAA) of 1925 and Section 7 of the National Labor Relations Act (NLRA) written ten years later, which allows employees “the right … to engage in other concerted activities for … mutual aid or protection.”

The court sought to determine if NLRA Section 7 superseded the FAA’s mandate to enforce arbitration agreements. Specifically, the question posed to the court was if the NLRA’s protection of “other concerted activities” created the right for employees to pursue class action suits that invalidated employment agreements by displacing the FAA’s mandate to require arbitration.

Businesses have long supported individual arbitration as a more efficient way to resolve disputes.  They also feel it may to deter frivolous claims that could result in costly court proceedings. On the other hand, labor organizations and consumers argue that nondisclosure clauses typically included in arbitration are weighted in favor of businesses. Consequently, this can keep any systemic misconduct under wraps and out of public scrutiny.

Related:  Human Resources Responsibility: Protecting the Employee or the Company?

Opinions on the Ruling

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Justice Neil M. Gorsuch

Writing for the majority, Justice Neil Gorsuch stated, ”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. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA — much less that it manifested a clear intention to displace the Arbitration Act. Because we can easily read Congress’s statutes to work in harmony, that is where our duty lies.” He was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito.

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Justice Ruth Bader Ginsburg

Justice Ruth Bader Ginsburg voiced dissent by writing that such employment contracts reflected no agreement at all. In two of the cases before the court, she wrote, the employer emailed its workers a notice that wage claims would be resolved through individual arbitration, and that if they didn’t quit they were “deemed to have accepted” the waiver.

To Justice Ginsburg, the arbitration act was relatively technical legislation, the intent of which is to regulate the resolution of commercial disputes between businesses of similar bargaining power. In contrast, the NLRA reflected a national policy “to place employers and employees on a more equal footing,” she wrote, joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

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