Supreme Court Allows Employers to Ban Class Action Lawsuits

For a variety of workers, the class action lawsuit has been a powerful tool against employer abuse, but in a new Supreme Court decision, the court’s conservatives have given companies the right to ban potential employees from joining class action lawsuits as a condition of employment.

The 5-4 ruling, based on three cases, was written by Justice Neil Gorsuch, Donald Trump’s Supreme Court appointee. As NPR reports, Gorsuch wrote “that the 1925 Federal Arbitration Act trumps the National Labor Relations Act and that employees who sign employment agreements to arbitrate claims must do so on an individual basis—and may not band together to enforce claims of wage and hour violations.”

In other words, instead of harnessing their collective power, employees who have signed such contracts can’t join a class action lawsuit and instead must seek recourse individually, through arbitration.

The decision strengthens employers’ arguments that forced arbitration clauses don’t violate labor laws. As Gorsuch wrote, “This court is not free to substitute its preferred economic policies for those chosen by the people’s representatives.”

As Politico points out, “Studies have shown that workers win far less often in mandatory arbitration than in court.” Compounding the problem for employees, “since most arbitration is conducted in secret, mandatory arbitration has helped businesses avoid unfavorable publicity that might compel them to address chronic worker abuses.”

The three cases were brought against Ernst & Young LLP, Epic Systems Corp. and Murphy Oil USA Inc. All three companies required employees to sign contracts with forced arbitration clauses. The employees in question had tried to join together, saying that any money they’d win in individual cases would be cancelled out by massive legal fees required to try these cases individually.

In her dissent, read from the bench, Justice Ruth Bader Ginsburg warned that the ruling will lead to “underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

She also encouraged Congress to step in and update federal labor laws.