Supreme Court Upholds Arbitration Agreements

June 01, 2018

The U.S. Supreme Court issued a 5 to 4 decision holding that the National Labor Relations Act does not prohibit mandatory pre-dispute arbitration agreements that preclude class action lawsuits for employment law claims.

The problem: Mandatory arbitration agreements have been under attack for years.  Already, defense contractors are prohibited from using arbitration agreements with employees. 

What's new: Arbitration agreements have come under attack amid the current wave of high-profile sexual harassment charges.  A bipartisan group of Senators introduced the "Ending Forced Arbitration of Sexual Harassment Act," which would prohibit the use of pre-dispute arbitration agreements for any Title VII claim, despite its narrower title.  Notably, the NLRB case dealt solely with wage and hour claims.

The decision rejects the NLRB’s recent broad interpretation of “protected concerted activity,” which was one of several decisions by the Obama Board expanding that protection well beyond union activity.  As in many of those cases, HR Policy joined several other business groups in an amicus curiae brief urging a more traditional interpretation of the protection.

Crystal Ball: The Supreme Court decision is a victory for employers that use arbitration agreements.  However, it is likely to increase pressure on Congress to limit such agreements.  As the decision notes, “when Congress wants to mandate particular dispute resolution procedures it knows exactly how to do so.”