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Supreme Court rules on mandatory arbitration vs. class-action

Mandatory arbitration agreements for employees have been ruled enforceable by the Supreme Court.

When it comes to employment disputes, the process used for resolving the dispute can be just as important as the dispute itself. Employers typically prefer to resolve employee disputes through arbitration, since arbitration is usually cheap, fast, and confidential. Employees, on the other hand, can also benefit from arbitration, but have also enjoyed having the option of pursuing class-action lawsuits, which allows numerous employees with the same complaint against an employer to band together and thus spread the cost and risk of pursuing a complaint between them. In a controversial move, the U.S. Supreme Court recently ruled when an employer can force an employee to accept mandatory arbitration and waive their right to pursue a class-action lawsuit.

Mandatory arbitration vs. class-action

Many employment contracts include mandatory arbitration agreements. As the New York Times reports, today about 54 percent of non-unionized employers have employment contracts that include mandatory arbitration agreements. In 1992, that figure was just two percent. Mandatory arbitration agreements essentially bind the employee to resolve any dispute he or she may have with the employer through arbitration rather than through the courts.

Many such agreements also require employees to waive their right to resolve disputes through collective action, such as a class-action lawsuit against the employer. Federal law is notoriously split on the issue: while the 1925 Federal Arbitration Act tends to favor mandatory arbitration agreements, the National Labor Relations Act (NLRA) tends to favor the right of workers to pursue class-action lawsuits.

How did the court rule?

The court ruled in favor of the enforceability of mandatory arbitration agreements and thus against those who claimed that workers should have the right to pursue class-action lawsuits. The decision, however, as PBS Newshour reports, was very controversial, even among the nine justices who were split 5-4 on the issue.

Justice Neil Gorsuch, writing for the majority, argued that the Federal Arbitration Act was clear in favoring mandatory arbitration agreements, whereas the NLRA gave only vague assurances of employees' rights to collective litigation.

Justice Ruth Bader Ginsberg, on the other hand, wrote a strong dissent. She claimed that forcing employees into mandatory arbitration was a violation of their rights. She worried that if workers cannot join together to pursue claims, then abusive employers would have less incentive to rein in their behavior.

Talking to an attorney

The above case is an example of why it is so important for either employees or employers who are involved in a dispute to reach out to an attorney for help. Regardless of whether a claim is being pursued in court or through arbitration, an attorney can advocate for their client's interests throughout the process.