What a difference an election makes. More good news came out of Washington, DC, when the U.S. Supreme Court ruled that employers can require individual job applicants to agree to use arbitration instead of initiating lawsuits to settle disputes over pay and working conditions.
The decision involved a perceived conflict between two laws. The Federal Arbitration Act allows employers to require their employees to individually arbitrate their employment-related claims. The National Labor Relations Act protects employees’ right to pursue collective action regarding wages and working conditions.
Class action lawsuits against employers have steadily grown both in number and in dollar value over the past two decades. “These lawsuits cost employers millions, often for technical or minor violations spread over many class members and several years,” notes attorney Hugh F. Murray III of the law firm of McCarter & English.
In 2012 the Obama-era National Labor Relations Board declared the NLRA prohibits arbitration agreements that limit employees to individual, as opposed to class, claims. The board held that making claims on behalf of several employees together was a form of acting concertedly for “mutual aid or protection,” which is specifically protected by the NLRA.
Opponents Manufacture Anger
Opponents the 5-4 split decision, like Justice Ruth Bader Ginsburg who wrote the minority’s dissent, strongly assert the decision unfairly undermines the essential rights of workers – although this conflict between the two laws only surfaced in recent years because of proliferating class action lawsuits.
In her dissent, Ginsburg also called on Congress to forge a legislative solution to the apparent conflict between the two laws found by the majority of her colleagues, and in that way overturn the decision.
That’s not likely to happen in a Republican-controlled Congress, or with President Donald Trump, who be counted on to veto such a bill even if it passed.
“Many on the employee rights’ side argue that arbitration itself disfavors employees,” observe attorneys Henson Adams and Laura E. O'Donnell of the law firm of Haynes and Boone.
“These conclusions overlook the laudable attributes of arbitration proceedings and the frequent reality that, it is plaintiffs’ attorneys, and not employees, who reap the most benefit from class and collective procedures,” they add.
But more narrowly targeted legislation may be able to summon up the required votes. In February, the attorneys general of all 50 states and six territories sent a letter to Congress seeking the passage of legislation that would outlaw mandatory arbitration of sexual harassment claims, helping to end what they call “a culture of silence.”
Legal observers say the court ruling is straightforward and has little ambiguity, and is expected to have an immediate impact. The NLRB currently has 55 cases involving this issue before it.
However, state laws also outlaw mandatory arbitration in California for employment claims and in New York regarding sexual harassment.
Any employer who doesn’t already have a mandatory arbitration agreement containing a litigation waiver should consider implementing one, recommend Adams and O'Donnell.
“From a pure cost standpoint, for many employers, and certainly most large employers, the ability to prevent higher dollar class and collective actions has a lot of appeal. We have seen many cases in which, even if the underlying claims are not strong, the class action procedure is used as a vehicle to increase costs and try to force settlement,” they say.