Supreme Court Upholds Class and Collective Action Waivers

In a much anticipated opinion, the Supreme Court on Monday held that class action waivers in arbitration agreements are enforceable. In a 5-4 decision written by Justice Neil Gorsuch, the Court stated that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.”

In ruling for the employers, the Court said “[t]he NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.” The Court noted it was unlikely Congress wished to confer a right to class or collective actions in Section 7 since those procedures were hardly known at the time the NLRA was adopted in 1935.

“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 Court concluded.

Justice Ruth Bader Ginsburg, however, was not persuaded by the majority’s opinion. She filed a dissent, which was joined by Justices Breyer, Sotomayor and Kagan. According to the dissent, the Court’s opinion “is egregiously wrong,” and “Congressional correction of the Court’s elevation of the FAA over workers’ rights to act in concert is urgently in order.” One reason for the dissent’s concern was that individual wage and hour claims tend to be small, so they are not necessarily worth pursuing on an individual basis. “But by joining together with others similarly circumstanced, employees can gain effective redress for wage underpayment commonly experienced,” Justice Ginsburg wrote. 

The dissent’s concerns notwithstanding, the Court’s decision is a win for employers by upholding class and collective action waivers in employment arbitration agreements.

If you have questions, feel free to contact the authors or your usual Dinsmore attorney.