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What Are The Effects Of The New Supreme Court Arbitration Case?

This past May, in a 5-4 decision, the United States Supreme Court ruled that employment contract arbitration clauses were enforceable against employees seeking to pursue class actions rather than submit their employment disputes to arbitration. The Court made this ruling despite the arbitration clauses being included in the contracts as a condition of employment.

Employees had argued that federal law required employers to allow their employees to pursue class action lawsuits against the employer even in the presence of arbitration clauses to the contrary. The Court found that federal law imposed no such requirement.

As a result of the Court’s ruling, both employers and employees can reasonably expect to encounter more employment agreements that include similar arbitration clauses. By requiring arbitration to resolve disputes between employer and employee, employers seek to limit expenses and to address each case on its own unique merits, something employers in the Supreme Court case said was not possible in class actions.

Employees, by contrast, had wanted to share costs between themselves through a class action. The Court determined, however, that those policy considerations did not override the federal law in question.

Employee-side advocates also raised the concern that such arbitrations, because they are not subject to public scrutiny, will make it less likely that individuals will pursue cases sounding in civil rights discrimination or harassment. Employer-side advocates believe, however, that employers are also interested in eliminating problem employees from their workplace, so the arbitration requirement will not put a damper on those complaints being brought forth through ethics hotlines or through internal discussions with other employees.

Employers and employees who have questions about how this recent Supreme Court case may affect their rights should consult with an experienced employment law attorney who can draw on insights from having represented both sides in these disputes.  

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