Supreme Court to Rule on Arbitration Clauses

Supreme Court to Rule on Arbitration Clauses

On Friday, the US Supreme Court agreed to hear a group of cases on the question of whether companies can contractually constrain employees from pursuing class action lawsuits over labor disputes and force them into case-by-case arbitration, the New York Times reported:

The court accepted three cases on the subject. They follow a series of Supreme Court decisions endorsing similar provisions, generally in contracts with consumers. The question for the justices in the new cases is whether the same principles apply to employment contracts.

In both settings, the challenged contracts typically require two things: that disputes be raised through the informal mechanism of arbitration rather than in court and that claims be brought one by one. That makes it hard to pursue minor claims that affect many people, whether in class actions or in mass arbitrations. …

Arbitration clauses with class waivers are now commonplace in contracts for things like cellphones, credit cards, rental cars and nursing home care. … In the new cases, workers contend that employment contracts are different. They say a second law, the National Labor Relations Act, prohibits class waivers. The labor law protects workers’ rights to engage in “concerted activities.”

The Supreme Court became virtually certain to take up this issue last May, when the US Court of Appeals for the Seventh Circuit in Chicago ruled that arbitration clauses in employment contracts were illegal, disagreeing with another appeals court in New Orleans, which gave its blessing to such clauses in 2015. Split opinions in the circuit courts typically trigger review by the high court, which will often wait for such a split to emerge before weighing in on a matter of legal controversy.

What is less certain is how the court will rule in this case. The ruling is expected in April, the Times reports, by which time president-elect Donald Trump may have appointed a justice to fill the seat left vacant by the sudden death of Justice Antonin Scalia last February. If the ninth seat remains unfilled at the time of the ruling, a four-four split could occur, which would leave the existing circuit court opinions in force in their jurisdictions.