In a massive win for employers across the country, the U.S. Supreme Court has ruled that employers now have the green light to use class action waivers in their employment contracts. Today, the Court held in a 5-4 ruling that arbitration agreements barring employees from joining together in arbitration or in class-action lawsuits to settle disputes are enforceable under the Federal Arbitration Act (“FAA”).

The ruling, authored by Justice Neil Gorsuch, was the result of three consolidated cases: Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA, Inc., and Ernst & Young LLP v. Morris. In each of these cases, the employment contract at issue required that disputes between the employer and employee be settled in arbitration rather than court, and, importantly, that claims be filed on an individualized basis. Each employee nonetheless sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court. 

Although the FAA generally requires courts to enforce arbitration agreements as written, the employees argued that its “savings clause” removes this obligation if an arbitration agreement violates some other federal law and that, by requiring individualized proceedings, the agreements at issue violated the National Labor Relations Act (“NLRA”). Specifically, the employees, with the support of the National Labor Relations Board (“NLRB”), argued that barring employees from banding together in lawsuits and arbitrations violates their rights to engage in “concerted” activity under the protection of the NLRA.

However, the Court ruled that the FAA’s strong policy favoring arbitration required that arbitration agreements written like the ones at issue must be enforced as written. The majority also found that neither the FAA’s savings clause nor the NLRA demanded a different conclusion.

The ruling is a major victory for employers, especially those that already require employees to sign arbitration agreements with class action waivers as a condition of their employment. For employers who do not already have such agreements in place, they should strongly consider adding such provisions to their employment contracts as a shield against costly class action lawsuits.