(Bloomberg Opinion) -- Wondering what will happen if Justice Anthony Kennedy retires and President Donald Trump gets to pick his successor? The U.S. Supreme Court on Monday gave a good preview of that possible conservative future. In an extraordinary decision, the court barred workers from bringing collective legal action against employers if their employment contracts require individual arbitration instead.
Seen purely in terms of politics, the 5-4 outcome reflected the struggle between the pro-management conservative majority and the pro-labor liberal minority. Employers don’t want class actions filed against them. By making employees sign agreements that require individual arbitration of disputes, businesses can now be sure that they won’t be taken to court when they’ve shortchanged many employees minimally — even if the collective loss to employees is significant. From the perspective of employers, the decision is a major win.
Seen in terms of jurisprudence, the decision reflected a serious philosophical difference between the two wings of the court. The conservatives insisted on a literalist, original-intent reading of the relevant federal laws; the liberals focused on the laws’ purpose and the practical consequences of the decision.
The decision known as Epic Systems v. Lewis combines three cases, all of which grew out of fairly standard disputes between employers and employees over whether the workers were classified accurately and paid according to federal law. In such cases, it’s typical that no individual employee has enough money on the line to bother going to arbitration or to court. So lawyers fill the gap, bringing class actions on behalf of all employees similarly situated. Adding up their claims against a good-size company puts enough money on the table for the lawyers to make the case worthwhile.
What you think about this scenario pretty much tells you how you would've voted if you were one of the justices. Conservatives usually think this is just another instance of lawyers imposing unnecessary costs on business competitiveness. Liberals tend to think that without the lawyers to aggregate the claims and bring them, companies would get away with systematic illegal conduct.
On the legal level, the decision involved the relationship between two old statutes: the Federal Arbitration Act of 1925 and the National Labor Relations Act of 1935.
The FAA says that courts should enforce arbitration agreements as written, unless judges find that the agreement falls within “such grounds as exist at law … for the revocation of any contract.”
The NLRA, for its part, says that workers may join unions and engage in collective bargaining or “other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
The conservative opinion written by Justice Neil Gorsuch — his first really important decision for the court — simply took the FAA as controlling law. The arbitration agreements exist, and they should be followed unless there’s a legal reason not to.
Gorsuch first dismissed the idea that there was anything unlawful about the individual arbitration agreements. Then, for good measure, he explained that there was no reason to think that the “other concerted activities” permitted by the NLRA were meant to include class-action lawsuits, which were rare in 1935, and unknown in their modern form.
Gorsuch’s opinion is neatly argued and clearly written. If you lived on the moon, with no knowledge of the realities of labor relations or the politics of class actions, you’d think it was obviously correct. The justice is almost certainly right when he says that the authors of the NLRA weren’t thinking about class actions when they allowed collective action by employees.
But as Justice Ruth Bader Ginsburg pointed out in her stinging dissent, the reality of the NLRA is that it was enacted to overcome the long history of anti-union law and practice, including the notorious “yellow dog” contract, in which employees agreed not to join unions. The whole point of the NLRA, Ginsburg convincingly argued, was to reject the idea that employers could use their structural power in forming employment contracts to make employees give up their rights.
Seen from this perspective, the class-action suits look like exactly the sort of collective, “concerted” employee activity that the NLRA was designed to permit. If that is correct, then the NLRA, which was enacted after the FAA, should effectively modify the command that arbitration agreements should ordinarily be enforced.
To this argument Ginsburg added a further twist that under the NLRA, the individual arbitration agreements are in fact illegal. If so, then the agreements fall within the clause of the FAA that exempts arbitration agreements that would fail under ordinary contract law — because you can’t enforce a contract to do something illegal.
Ginsburg went further, implicitly accusing the conservative majority of reverting to the so-called Lochner era, when conservative justices struck down progressive legislation in the name of the liberty of contract. This was a clever rhetorical move, because the majority was in fact upholding the arbitration agreements as an exercise of the supposedly equal contracting rights of employers and employees.
But the accusation isn’t exactly correct, because today’s conservatives aren’t inventing constitutional rights out of whole cloth. They are simply relying on conservative interpretation of federal law passed by Congress.
It's true that, like the contested 5-4 decisions of the Lochner era before the New Deal, the justices seemed motivated by competing grand visions of politics. Expect more of that if Trump creates a stable conservative majority — and expect the conservatives to keep winning.
©2018 Bloomberg L.P.