The Supreme Court on Monday, in a 5-4 decision in Epic Systems Corp. v. Lewis, No. 16–285 (U.S. May 21, 2018) (consolidated cases), ruled that companies can use arbitration clauses in employment contracts to prohibit workers from banding together to take legal action over workplace issues.  The Court’s decision could affect some 25 million employment contracts.

Writing for the majority, Justice Neil M. Gorsuch said the court’s conclusion was dictated by another federal law, the Federal Arbitration Act which for over 70 years coexisted with the NLRA and during this time permitted individual arbitration agreements.  Gorsuch also noted that the NLRA’s protections on “concerted activity” must only be understood in the context of traditional labor relations matters (such as union organizing and collective bargaining), not civil litigation of claims arising under statutes other than the NLRA: “If workers were allowed to band together to press their claims,” he wrote, “the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace.”

The Court also rejected the argument that courts owe deference to the NLRB’s view of things, pointing out that courts do not and should not grant deference to an agency’s interpretation of a federal law outside its sphere of responsibility: “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.”

Requiring employees to submit class or collective claims to arbitration on an individualized basis is increasingly common.  Going forward, companies already employing this practice can be confident that the agreement is enforceable.  For employers who have not yet adopted such agreements, they should consider the benefits of doing so.  Our team of labor and employment attorneys can advise you on this topic.