The decision, authored by Justice Gorsuch for the majority, means employees who are bound by arbitration agreements which ban collective action as a condition of employment are not allowed to join class-action lawsuits or group arbitration proceedings.
The decision impacts tens of thousands of nonunion employees who, as a condition of employment, are required to waive their rights to join a class action suit.
In all three cases, employees tried to sue collectively, arguing that the amounts they could obtain in individual lawsuits were dwarfed by the legal fees they would have to pay as individuals to bring their cases under the private arbitration procedures required by the company.
For instance, the lead plaintiff for the Ernst & Young employees who sought to bring a class action had a case in arbitration that cost $200,000 in legal fees, although the possible recovery for unpaid overtime was only $1,800 to the individual.
The employees contended that their right to collective action is guaranteed by the National Labor Relations Act. The employers countered that they are entitled to ban collective legal action under the Federal Arbitration Act. Under this decision, the FAA's protection of arbitration overcomes the NLRA's protection of collective action by employees.
Bottom line: This decision will likely mean that many federal and state wage and hour violations, and other workers' rights claims will go largely unenforced because the cost to enforce them in individual arbitrations will far outweigh the potential recovery for any one individual. It also means that the outcome of such cases will remain secret because arbitration, unlike the public court system, is private.
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