The already meager rights of American workers just got significantly smaller, thanks to the Supreme Court. It ruled Monday that employees can use contracts with workers to ban them from joining class-action lawsuits – and to mandate individual arbitration in the event of disputes.
The decision came in a case that pitted two conflicted federal statutes against one another. As the Wall Street Journal summarized:
“The case exposed the conflict between the Federal Arbitration Act of 1925, which makes arbitration clauses generally ‘valid, irrevocable and enforceable,’ and the National Labor Relations Act, passed in 1935, which authorizes employees to take collective action for ‘mutual aid or protection.’ ”
Yes, the court, in a 5 to 4 ruling written by Justice Neil Gorsuch – who might not be there, except for the fact the Senate Republicans refused to give a hearing to Merrick Garland – backed the law dating to the United States’ first Gilded Age as if the New Deal never happened.
This ruling is a significant blow to the #MeToo movement, as well as to people attempting to combat wage theft and on-the-job discrimination. “It drastically tilts the playing field in favor of employers,” Ceilidh Gao, a staff attorney with the National Employment Law Project, told me. “It is a backdoor way to repeal workplace laws.”
Arbitration clauses in contracts between both consumers and companies and employers and employees, once almost unheard of, have multiplied over the past several decades. According to a study by the Economic Policy Institute, last year more than 50 percent of private-sector, non-union employers demanded that would-be employees agree to arbitration in the event of a dispute. Just shy of a third also insisted that their workers agree to surrender the right to join a class-action lawsuit.
This combination makes it all but impossible for workers who encounter discrimination, wage theft, harassment or other illegal employee behavior on the job to legally insist on their rights. Few workers, after all, have the thousands of dollars on hand to hire a lawyer to represent them either in a lawsuit or arbitration to do legal combat with their employers.
Moreover, Gao explained, most wage lawsuits, for example, involve relatively low-paid hourly workers, who are seeking a few thousand dollars they are owed. While that’s often riches to them, it’s not enough money to make an individual lawsuit worthwhile or to entice a lawyer to take the case on.
Class-action suits are a way around this bind. They allow people experiencing a similar issue with a particular company to band together to fight for justice, something that is all but impossible on their own for almost anyone but the wealthiest. As Justice Ruth Bader Ginsburg wrote in her dissent: “By joining hands in litigation, workers can spread the cost of litigation and reduce the risk of employer retaliation.”
But without that right, employers essentially get a free pass to ignore laws they don’t feel like honoring, since they can be confident no one will call them on it in any financially meaningful way.
In a paper published earlier this year in the North Carolina Law Review, Cynthia Estlund, a professor at the New York University School of Law, determined the vast majority of workers who sign arbitration agreements do not seek any legal redress when they believe an employer violated their legal rights. “The great bulk of employment disputes that are subject to [mandatory arbitration agreements] simply evaporate before they are ever filed,” she wrote.
So what comes next, now that the Supreme Court says mandatory arbitration and banning employees from joining class actions against them is permissible?
Gao told me she expects to see the number of employers who insist on these agreements rapidly multiply in the wake of today’s ruling. “It’s going to become standard industry practice,” she said. “Any well counseled employer is going to adopt them.”
Will there be workarounds, now that the Supreme Court has made its ruling? There already is one. In California, a 2004 law allows people to file and take part in class-action suits as representatives of the state government, provided the state department of labor signs off on the case. This allows employees a way around contracts they’ve signed forcing them into mandatory arbitration. As Bloomberg noted, companies that have paid settlements in such California cases include Bank of America and Walmart. A number of other left leaning states including New York are now considering passing similar legislation.
But even if those efforts expand, it will still leave a lot of injustice out there. It would be more effective if Congress took up the issue. Some Democrats would like this to happen. Connecticut Sen. Richard Blumenthal has sponsored the Arbitration Fairness Act, which would render arbitration clauses unenforceable in employment, consumer, antitrust or civil rights violations – in other words, it would all but ban them. Then there is New York Sen. Kirsten Gillibrand’s more limited proposed legislation that would ban the use of such contracts to silence workers making sexual harassment claims.
But as long as Republicans control the House, Senate and presidency, we can expect these bills to go nowhere on the federal level. There is no getting around this: Until Democrats take back control of Congress and are able to pass legislation reversing this ruling, our country will be meaner, harder place to be an employee.
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