The Supreme Court decided yesterday 5-4 that employers have a right to force employees into individual arbitration rather than face them in a class action suit.
The suit, Epic Systems Corp v. Lewis was filed by three employees who were required by their employer to waive their rights to class action suits against the company as a condition of employment.
The employees sued claiming that the attorney fees resulting from an attempt at individual arbitration would nullify any economic award, and argued they should be allowed to pursue class actions law suits instead. Supreme Court Justice Ruth Bader-Ginsburg noted a typical employee would likely have to spend $200,000 to recover only $1,900 in overtime pay.
Employees contended their right to join class action is guaranteed by the National Labor Relations Act of 1935
Employers contended their right to ban collective action was guaranteed by the Federal Arbitration Act of 1925.
This decision represents a major win for employers. Ron Chapman, who represents management in major labor disputes says “It gives employers the green light to eliminate their single largest employment risk with the stroke of a pen”. He expects businesses of all sizes to immediately move to impose binding arbitration clauses in their employment contracts.
A study by the Economic Policy Institute shows that 56% of nonunion, private sector employees are currently subject to mandatory individual arbitration procedures.