Skip to main content

Employers Just Scored a Major Victory in the Supreme Court

The Supreme Court just ruled that employers can require employees to agree to arbitration and waive their rights to file class-action lawsuits.
Morning light shines outside the U.S. Supreme Court building on March 20th, 2017, in Washington, D.C.

Morning light shines outside the U.S. Supreme Court building on March 20th, 2017, in Washington, D.C.

The Supreme Court ruled on Monday that businesses can require employees to agree in their employment contracts to resolve any disputes with their employers via arbitration and to waive their rights to participate in class-action lawsuits against their employers.

In the majority opinion delivered during the 5–4 ruling, Justice Neil Gorsuch—joined by Justices John Roberts, Anthony Kennedy, Clarence Thomas, and Samuel Alito—wrote that decisions on the merits of class-action and arbitration should be left to the legislative branch.

"The respective merits of class-actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches where those questions remain hotly contested," Gorsuch wrote. "This court is not free to substitute its preferred economic policies for those chosen by the people's representatives."

Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan dissented. Ginsburg read her dissent aloud from the bench, describing the decision as "egregiously wrong" and warning that "[e]mployers, aware that employees will be disinclined to pursue small-value claims when confined to proceeding one-by-one, will no doubt perceive that the cost-benefit balance of underpaying workers tips heavily in favor of skirting legal obligations."

In recent years, the use of mandatory arbitration clauses in employment contracts has risen substantially. In a report published last year, the Economic Policy Institute, a liberal think tank, concluded that the percentage of workers in the United States now subject to mandatory arbitration is over 55 percent, up from just 2 percent in 1992. The report also found that, among employers who require mandatory arbitration, over 30 percent also ask employees to waive their right to file and join a class-action lawsuit. Workers who sign contracts with these types of clauses forgo their rights to pursue legal claims over everything from wage theft, to discrimination, to sexual harassment.

These types of clauses have also found their way into the contracts consumers sign when doing everything from opening bank accounts, to taking out credit cards, to enrolling relatives in nursing homes. In an investigative series on arbitration clauses published in the New York Times in 2015, Jessica Silver-Greenberg and Michael Corkery concluded that, in arbitration, "rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients." Under President Barack Obama, the Consumer Financial Protection Bureau conducted a study of the issue and published a rule barring financial services companies from requiring customers to waive their rights to class-action lawsuits. Last fall, the Republican-led Congress voted to repeal the rule.

Business groups and Republicans have lauded the decision, while workers' rights advocates warn it strips American workers of an important tool for holding employers accountable.