A 5-4 decision by the Supreme Court of the United States holds that arbitration agreements made by employers and employees can resolve labor disputes and stops employees from joining together on class action lawsuits. Multi-plaintiff FSLA lawsuits have dramatically increased since 2000 and a way for employers to mitigate their risk is implementing an arbitration program with class and collective action waivers.

Employees often sign contracts without recognizing that those contracts contain arbitration agreements barring them from collective action. Arbitration agreements were made legal by the Federal Arbitration Act of 1925 and a decade later, the National Labor Relations Act protected employees‘ rights to join unions and engage in collective bargaining. Employers favor arbitration agreements as it provides a route to resolve disputes over benefits, pay, and other matters instead of going to court. Last year, about 54% of companies reported using arbitration agreements in contracts and about a third of those contracts barred workers from bunching together and filing class-action lawsuits. As a result of these arbitration agreements, the question before the court was whether the right to band together as plaintiffs in actions rendered individual arbitration agreements void as the National Labor Relations board decided in 2012.

Justice Neil Gorsuch authored the majority opinion in this arbitration case between labor unions and corporations. Justice Gorsuch wrote that “as a matter of policy, these questions are surely debatable” but “this court is not free to substitute its preferred economic policies for those chosen by the people‘s representatives.” Stated simply, this is an issue that the people should bring up to their legislatures.  Justice Ruth Bader Ginsburg, on the other hand, who wrote the dissent said as a result of the ruling “there will be huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

Including mutual arbitration agreements as part of employment contracts will allow employers and employees to waive their rights to band together in class action lawsuits.