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Key contractual element upheld by U.S. Supreme Court

On Behalf of | May 26, 2018 | Contract Disputes |

Employers of every size and type in New York City and across the state focus strongly upon the agreements they execute with workers, especially key employees.

One contractual clause they see as being vitally important is a provision addressing how a worker/business dispute will be resolved. One recent national business article notes that many American companies insist on arbitration provisions in their employment agreements.

Legions of them have in fact been executing arbitration-only pacts with workers for nearly a century. Federal legislation first made arbitration agreements legal back in 1925.

Clauses mandating arbitration in lieu of litigation for dispute resolution in employment matters have been targeted for attack in recent years by pro-worker groups. A common complaint stresses that they push worker grievances into a private process that arguably lacks the same protections that are afforded in court. Moreover, forced arbitration requires that an aggrieved worker proceed with a claim in an individual capacity, lacking the opportunity to solicit other similarly affected employees in a collective capacity (such as a class action filing).

Those complaints were tested and ruled upon just last week by the U.S. Supreme Court in a closely watched case viewed as a contest between workers’ rights and management’s contractual prerogatives.

The court ruled in a 5-4 decision that a duly executed and reasonably drafted arbitration provision “must be enforced as written.” Writing for the majority, Justice Neil Gorsuch noted that such clauses are sanctioned by longstanding federal law and that it is within the power of Congress – not the courts – to modify existing legislation concerning them.

Employers and business industry groups obviously endorse the court’s ruling. Reportedly, more than half of all employment contracts executed in the United States last year contained arbitration clauses.