Supreme Court Deals Major Blow to Class Action Suits by Employees

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Supreme Court Deals Major Blow to Class Action Suits by Employees 
By: Christopher Wurster, Esq.

In a decision that will have major real-world consequences for private sector employees, the Supreme Court ruled today that employers can require their employees to sign class action waivers in arbitration agreements. While that sounds technical, it will affect about 56% of nonunion private sector employees, and that’s a huge number.

Let’s break this down. Many employers in the private sector, especially in higher paying jobs, require their employees to sign employment agreements that cover any number of issues, from non-competition obligations, to confidentiality, to intellectual property. Some of those agreements also require employees to waive their ability to sue in court. Instead, employees may have to agree to use arbitration rather than the court system. Arbitration is a form of alternative dispute resolution where an impartial decision-maker, called an arbitrator, decides the case. Arbitration is favored by many businesses not only because it can be cheaper than litigation in court, but also because businesses often know the arbitrators who will decide the cases.

Some employers have gone one step farther, requiring employees to waive the ability to band together with other employees in a group action, or “class action.” This practice was challenged in court and ultimately wound up before the nation’s high court, resulting in the decision handed down today.

In that decision, the Supreme Court ruled that nothing in the National Labor Relations Act – a federal law which protects the rights of union and nonunion employees to join together to challenge working conditions – prevented employers from requiring their employees to waive their ability to file class actions in arbitration agreements.

This is a huge deal. Many employment practices that wind up being challenged in court are small when considered on an individual basis. For example, if your employer fails to pay you overtime in violation of the Fair Labor Standards Act, you may wish to sue (or go to arbitration). But your individual lawsuit may be worth very little. Maybe your employer’s policy only results in a loss to you of a few hundred dollars per year. It’s probably not worth suing over that because of the time and expense of a lawsuit. But if there were fifty other employees suffering from the same harm, it would be possible to join together in a class action, where you would have significantly more bargaining power.

The Court’s decision today allows employers to block your ability to join with others in that type of class action. That effectively means that violations of federal laws related to employment will go unremedied in many cases because it simply won’t be worth it for an individual employee to pursue the case.

The Court has already ruled that class action waivers are valid in the consumer context; and they have now extended it into the employment arena, dramatically undermining the rights of employees throughout the country. Congress can undo this decision through legislation, but given the current makeup of Congress, which heavily favors corporations over individual rights, that’s not going to happen anytime soon.

Nevertheless, if you believe your rights are being violated in the workplace, please call Levine-Piro Law to schedule a consultation. We can evaluate your situation and help you decide how best to pursue your case.

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