SCOTUS Permits Employee Arbitration Clauses That Forbid Class Actions

On May 21, 2018, a divided U.S. Supreme Court held that employers can force employees into individual arbitration and avoid class action lawsuits involving those same employees.

By way of background, in 1925, Congress passed the Federal Arbitration Act ("FAA"), which validated arbitration clauses.  In 1935, Congress passed the National Labor Relations Act ("NLRA"), which gave employees the right to work together for "mutual aid and protection."  The case of Epic Systems Corp. v. Lewis shed some light on how those two laws are supposed to co-exist.

Epic and its two sister cases centered on employment contracts that contained arbitration clauses which required individual arbitration of all claims.  The employees in question wanted to bring both individual and class action claims in court against their employers. They argued their NLRA rights to group activity trumped the FAA, permitting them to avoid arbitration the clauses and proceed with a class action.