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SCOTUS Hands Employers 'Epic' Victory in Arbitration Battles

Back in 1925, Congress passed the Federal Arbitration Act, which states that agreements to arbitrate disputes "shall be valid, irrevocable, and enforceable." Ten years later, Congress passed the National Labor Relations Act, a federal law that protects the rights of certain employees to unionize, collectively bargain, and to work together for "mutual aid and protection."

And in 2018, it was time for the Supreme Court to decide if these two laws were in conflict, and if employment contracts including a clause requiring employees to waive their right to resolve disputes through joint legal proceedings, and instead arbitrate their claims individually, were enforceable. But where employers and employees saw conflict, the Supreme Court found compatibility, ruling such clauses don't violate federal employment laws.

An "Epic" Decision

In Epic Systems Corp. v. Lewis and three related cases, aggrieved employees argued that Section 7 of the NLRA protects the right of employees to engage in collective activity, including, according to them, the right to litigate employment dispute collectively or as class actions. Mandatory, or "forced" arbitration clauses that prohibit employee class action lawsuits, claimed the plaintiffs, violated this law.

Employers, however, sought to invoke the FAA's provisions that encourage the enforcement of most arbitration agreements and provide that those arbitration agreements should be enforced on their terms. So, does the NLRA trump the FAA in the employment arbitration arena? Not according to the Supreme Court.

Harmonious Ruling

"Our rules aiming for harmony over conflict in statutory interpretation," Justice Neil Gorsuch wrote for the majority, "grow from an appreciation that it's the job of Congress by legislation, not this Court by supposition, both to write the laws and to repeal them." But the Court itself lacked such consensus, splitting 5-4 along ideological lines.

Despite a harsh dissent from Justice Ruth Bader Ginsburg (that urged "Congressional correction of the Court's elevation of the FAA over workers' rights to act in concert") the majority tipped the scales in the FAA's favor. Noting that the NLRA "focuses on the right to organize unions and bargain collectively," and that the law "does not express approval or disapproval of arbitration" and "does not mention class or collective action procedures," the Court ruled the two laws could coexist peacefully:

"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."

This is obviously good news for employers relying on arbitration clauses to avoid class action employment lawsuits. If you want more information on the Court's ruling could affect your employment contracts, or how arbitration agreements could be helpful to your business in general, talk to an employment attorney.

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