Supreme Court Rejects NLRB Decision, Holds Class Action Waivers in Employment Contracts May Be Enforced

The Supreme Court recently held that employers can enforce arbitration agreements that provide for waiver of class action rights over employment-related disputes.  Writing for the majority, Justice Gorsuch declined to take the position of the National Labor Relations Board (NLRB) that the National Labor Relations Act overrides the Federal Arbitration Act.

The decision consolidates three similar cases.  In each, an employee whose contract required all employment disputes to go to individualized arbitration nevertheless filed a class action lawsuit against the employer, who moved to compel arbitration in response.  The Federal Arbitration Act requires that courts enforce such arbitration agreements to the full extent of the terms for which the parties contracted.  However, the employees and the NLRB—per a 2012 NLRB administrative decision—asserted that, because Section 7 of the National Labor Relations Act protects unionization, collective bargaining, and “other concerted activities,” it displaces the Federal Arbitration Act.  They argued that employers cannot legally require their employees to consent to individualized arbitration because the catchall term, “other concerted activities,” includes protections for class action litigation rights.

Relying on past precedent and principles of statutory interpretation, the Court held that nothing in the National Labor Relations Act or its history supports the conclusion that it overrides the Federal Arbitration Act by protecting employees’ rights to sue collectively.  The Court pointed to its recent history of cases enforcing arbitration agreements that were either silent on class arbitration or explicitly set forth that no class arbitration is allowed, as well as the statutory history of both the Federal Arbitration Act, which was passed first in time, and the National Labor Relations Act, which made no mention of any intent to override the preference for arbitration.

The opinion may be found here.