584 U.S. __ (2018)
In each of three consolidated cases, an employer and an employee entered into a written contract specifying that disputes arising from the employment relationship would be resolved through individualized arbitration proceedings rather than in court.1 The agreements in the Ernst & Young case, for example, allowed the employee to select the arbitration provider and permitted the arbitrator to grant any relief a court could grant, but required that claims pertaining to different employees be heard in separate proceedings.2
After their employment ended, the employees filed suit in federal district court.3 They asserted claims under the Fair Labor Standards Act for unpaid overtime and related state-law claims, and they sought to litigate those claims on behalf of a nationwide class or collective group of similarly situated employees.4
In the Ernst & Young matter, junior accountant Stephen Morris filed such a suit after leaving the firm.5 The employers responded by moving to compel arbitration under the terms of the contracts.6
District courts in some of the cases granted the motions and ordered the employees to proceed in individual arbitrations.7 In the Ernst & Young case the district court compelled arbitration, but the Ninth Circuit reversed that order.8 Parallel proceedings occurred in the Seventh and Fifth Circuits, producing conflicting results on whether the arbitration agreements could be enforced.9
In 2012 the National Labor Relations Board issued its first decision addressing agreements of this type, concluding that the National Labor Relations Act rendered unlawful any contractual requirement of individualized arbitration.10 Before that Board decision, courts and the Board's own general counsel had treated such agreements as enforceable.11 The three cases reached the Supreme Court after the Court granted certiorari in 2017 to resolve the disagreement among the circuits and between the Board and several courts of appeals.12
Whether the Federal Arbitration Act requires courts to enforce agreements between employers and employees that provide for individualized arbitration proceedings to resolve employment disputes?13
The Federal Arbitration Act, 9 U.S.C. §§ 2, 3, 4, requires courts to enforce arbitration agreements according to their terms, including terms specifying individualized proceedings.14 The Act's saving clause recognizes only generally applicable contract defenses such as fraud, duress, or unconscionability and does not save defenses that target arbitration by interfering with its fundamental attributes.15
Yes. The established facts show that in the Ernst & Young case Stephen Morris and the firm entered an agreement requiring claims pertaining to different employees to be heard in separate proceedings.16 The FAA's emphatic directions to treat arbitration agreements as valid and to direct arbitration in the manner provided for in the agreement therefore require enforcement of these terms as written.17
The Federal Arbitration Act requires courts to enforce the individualized arbitration agreements in these cases.18
Related opinions on this issue
Justice Thomas joined the Court's opinion in full but wrote separately to emphasize an additional ground for the result.19 He explained that the saving clause of the Federal Arbitration Act applies only to defenses that concern the formation of the arbitration agreement.20 Illegality under the NLRA is a public-policy defense rather than one going to whether the contract was properly made.21
Because refusal to enforce a contract for public-policy reasons does not concern contract formation, the saving clause does not apply here.22 For this reason and the reasons in the Court's opinion, the employees' arbitration agreements must be enforced according to their terms.23
Whether the National Labor Relations Act renders unlawful or unenforceable agreements between employers and employees that require individualized arbitration proceedings rather than class or collective actions?24
Section 7 of the NLRA guarantees employees the right to self-organization, to form, join, or assist labor organizations, to bargain collectively, and to engage in other concerted activities for mutual aid or protection, but it does not mention class or collective action procedures and does not express a clear and manifest intention to displace the Federal Arbitration Act.25
No. The established facts establish that the employees sought to litigate FLSA claims as class or collective actions despite having signed individualized arbitration agreements.26 Section 7 focuses on organizing unions and bargaining in the workplace rather than on procedures for adjudicating claims in court or arbitration.27 The NLRA's structure provides no rules for class certification, opt-in procedures, or notice, confirming that it does not address or override the FAA's command to enforce the parties' chosen arbitration terms.28
The National Labor Relations Act does not render the individualized arbitration agreements unlawful or unenforceable.29
Related opinions on this issue
Joined by Justices Breyer, Sotomayor, And Kagan
Justice Ginsburg dissented on the ground that Section 7 protects employees' right to engage in concerted activities including collective litigation to enforce wage and hour claims.30 She explained that suits to enforce workplace rights collectively fit comfortably under the umbrella of concerted activities for mutual aid or protection.31 Employer-dictated waivers of that right constitute unfair labor practices under Section 8(a)(1) and are unenforceable.32
The FAA's saving clause permits invalidation of such illegal provisions without discriminating against arbitration.33 She further noted that the NLRA and its predecessor were enacted to redress the imbalance of power between employers and employees, and that the Court's decision subordinates employee-protective legislation to the Arbitration Act.34
Whether the National Labor Relations Board's 2012 interpretation of the National Labor Relations Act is entitled to Chevron deference in cases involving arbitration agreements under the Federal Arbitration Act?35
Chevron deference applies only when an agency interprets a statute it administers, when traditional tools of statutory construction leave an ambiguity, and when the executive branch speaks with one voice on the matter.36
No. The established facts show that the Board in 2012 for the first time asserted that the NLRA nullifies the Arbitration Act in cases involving individualized arbitration agreements.37 The Board sought to interpret the NLRA in a manner that limits the work of the FAA, a statute the Board does not administer.38 The Board and the Solicitor General offered conflicting positions, and traditional canons against implied repeals resolve any purported conflict without ambiguity.39
The National Labor Relations Board's 2012 interpretation is not entitled to Chevron deference.40