Supreme Court Rules Employers May Compel Employees to Surrender Class Action Rights

There are many employment law situations in which it may benefit workers to band together and pursue joint legal action. For instance, if an employer routinely fails to pay overtime–in violation of the Fair Labor Standards Act (FLSA) and New York State law–the affected employees could file a class action to recover damages. A class action is a special kind of legal proceeding where multiple plaintiffs who are injured by the same defendant in the same way can pursue a single claim in the courts.

Class actions are therefore an efficient mechanism for resolving labor law violations. Unfortunately, many New York employers try to preempt the class action process by compelling employees to sign contracts that provide for individual arbitration of all employment-related disputes. In other words, rather than allowing 100 employees to file a single lawsuit in federal court against the employer, each individual employee must separately agree to binding arbitration–a proceeding where employees are often a significant disadvantage.

Does Federal Arbitration Law Override Federal Labor Law?

Although employment arbitration agreements are highly controversial, federal law strongly encourages their use as a means of lowering the number of cases that end up in court. Under a recent decision by the U.S. Supreme Court, employers now have an even freer hand in using arbitration clauses to thwart potential class actions.

The Supreme Court actually ruled in three separate cases that raised the same question of law. In each lawsuit, a group of workers signed employment contracts that contained mandatory arbitration provisions. Aggrieved workers then attempted to file a class action complaint notwithstanding the arbitration agreement. The respective employers then moved to dismiss the class actions, arguing that the Federal Arbitration Act protected their arbitration agreements “from judicial interference.”

By a five to four vote, the Supreme Court sided with the employers. The majority explained the Arbitration Act “requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” Although the National Labor Relations Act (NLRA) protects the legal right of employees to engage in “concerted activities,” the Court said that did not override the application of the Arbitration Act to the plaintiffs' claims here.

Writing for the four dissenting members of the Court, Justice Ruth Bader Ginsburg said the majority's interpretation of the law was “egregiously wrong.” Ginsburg noted the NLRA was expressly designed to protect the ability of employees to “act collectively in order to match their employers' clout in setting terms and conditions of employment.” Forcing employees to arbitrate claims individually, Justice Ginsburg noted, amounted to unlawful “employer-dictated collective-litigation stoppers” that, contrary to the majority's view, were not subordinate to the Federal Arbitration Act.

Speak With a New York Overtime and Wage Hour Attorney Today

Justice Ginsburg's powerful dissent aside, the Court's decision places many New York workers in a difficult situation. If you have agreed to an employment contract with an arbitration provision, even without realizing it, your options for seeking redress in the courts may be severely limited. That is not to say you will not be able to prevail in an arbitration proceeding, but you will not have the same due process and procedural rights as you would in a class action, or even individual litigation.

If you are concerned about the impact of an arbitration agreement on your legal rights in the workplace and would like advice from a qualified New York employment attorney, contact the Law Offices of Nisar Law Group, P.C., today.