“Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?” asked Justice Neil Gorsuch, “Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?”

Employees will be held to what they agreed with their employer, according to the Supreme Court in an opinion penned by Justice Gorsuch. The May 21 ruling bundled three cases brought against Ernst & Young LLP, Epic Systems Corp. and Murphy Oil USA, Inc. In each case, individual employees waived their rights to join a class-action suit, instead agreeing to one-on-one arbitration in employment disputes. In all three, employees broke from those agreements, filing class action lawsuits against their employers. The employees argued there was strength in numbers— and money enough for legal fees to take on the task. Employers contended the terms of employment should still be valid, including the employees’ agreement to arbitrate individually.

While billed as a battle between labor and employment, the case was distilled to a decision between two long-standing laws governing employer-employee terms: the Federal Arbitration Act (FAA) and the Fair Labor Standards Act (FLSA). In the end, the Court decided employees who’ve agreed to arbitrate wage and hour claims must do just that, and must bring their claims as individuals rather than a collective or part of a class.

“The parties before us contracted for arbitration,” Gorsuch continued. “They proceeded to specify the rules that would govern their arbitrations, … And this much the Arbitration Act seems to protect pretty absolutely.”

For employees, the decision prevents them from collectively suing or seeking arbitration as a class related to terms of their employment. For employers, the ruling in effect protects them from such claims that can be both costly and time-consuming to defend or settle.

Real World Implications of Decision

The threat of expensive, federal class-action employment lawsuits is diminished under the Court’s decision. Employers can further lessen their risk of FLSA and state wage and hour violations through clear and consistent communication with workers, and thorough documentation, including:

  • Accurate time-keeping and record-keeping practices
  • Proper classification of exempt and nonexempt employees
  • Routine wage and hour audits
  • Monitoring status of independent contractors

 For employers, wage and hour liability includes failure to properly calculate overtime pay, miscalculation of wages, underpayment of wages or overtime, refusal to pay exempt employees for absences, refusing employee breaks, expecting employees to work while off the clock, and other violations. Employers should consult with their legal advisors, or the employment law specialists at O’Hagan Meyer for more detailed explanation of this decision and how to revise terms of employment under the law.

The opinion of the Court may be found at https://www.supremecourt.gov/opinions/17pdf/16-285_q8l1.pdf