Employers win with Supreme Court’s mandatory arbitration ruling

This article looks at why the Supreme Court ruled in favor of the enforceability of mandatory arbitration clauses.

The U.S. Supreme Court recently delivered a verdict that is being described as a win for private, non-unionized employers across the country. As PBS Newshour reports, the court ruled that employment contracts containing mandatory arbitration agreements are fully enforceable and binding. Such mandatory arbitration agreements had become controversial because critics contended that they denied employees the right to pursue collective litigation. However, employers and others insisted that federal law allows for such mandatory agreements and that arbitration is a cheaper and more efficient alternative to litigation.

Two laws, two interpretations

Federal appellate courts throughout the country had become divided on the issue of whether mandatory arbitration agreements, which are included in many non-unionized employment contracts, are legally enforceable. In most such contracts, employees waive their right to pursue collective litigation (i.e., class-action lawsuits) as a way of resolving employment disputes.

The dispute came down to whether to give greater credence to the 1925 Federal Arbitration Act or the National Labor Relations Act (NLRA). The Federal Arbitration Act tends to be favored by employers since it generally allows for the enforceability of mandatory arbitration clauses. The NLRA has, on the other hand, been interpreted as giving employees the right to pursue collective legal action in resolving disputes with employers.

Court rules for mandatory arbitration

The court was split along ideological lines on the issue, with the conservative majority winning the day in a 5-4 split. Justice Neil Gorsuch pointed out that the Federal Arbitration Act is fairly explicit in favoring mandatory arbitration as an alternative to litigation. Writing for the majority, he insisted that the NLRA, on the other hand, offers only vague guarantees of the right to collective litigation for employees.

However, in a strong dissent, Justice Ruth Bader Ginsberg insisted that the ruling was a threat to workers' rights. As the New York Times reports, she pointed out that mandatory arbitration agreements are now used by 54 percent of non-unionized private employers, up from just two percent in the 1990s. By denying employees an avenue to pursue collective action, she worried that employers would have less incentive to respect their employees' rights. Justice Gorsuch, however, called such arguments "apocalyptic" and insisted that if employees were to be given such rights then it is up to Congress and not the Supreme Court to change the law.

Employment and business law

Employers who are facing a dispute with a current or former employee should contact an employment and business law firm as soon as possible. Such disputes can prove costly and time consuming, but with an experienced legal team on their side employers will have the expertise and advocacy they need to help resolve disputes quickly and effectively.