The U.S. Supreme Court dealt workers across the U.S. a giant blow Monday with an arbitration ruling that effectively robs employees of their right to collectively sue employers for back wages, discrimination, and other damages.
The 5-4 ruling along party lines upholds the use of class-action waivers in arbitration agreements, which many employers make workers sign as a condition of employment. Opponents of forced arbitration say such agreements legalize wage theft and other wrongdoing by stripping employees of their right to band together and challenge their employers in court.
Because arbitration agreements are intended to shutter workers out of the civil justice system, they empower employers to insulate themselves from the legal repercussions of policies and practices that harm workers.
Monday’s decision echoes a previous SCOTUS ruling that dealt consumers a similar defeat by sanctioning companies’ use of pre-dispute arbitration agreements as a condition of buying a plane ticket, cell phone service, or just about any form of consumer good or service.
During oral arguments on employers’ use of class-action waivers last year, Justice Stephen Breyer said a decision in favor of arbitration could undermine “the entire heart of the New Deal” by weakening the right of workers to collectively litigate and bargain.
An ‘egregiously wrong’ decision
In a strong dissent, Justice Ruth Bader Ginsburg called the majority’s decision “egregiously wrong,” indicating it sets up a David v. Goliath scenario for the worker.
“The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts. Over 80 years ago, Congress recognized that for workers striving to gain from their employers decent terms and conditions of employment, there is strength in numbers,” she said, noting that Congress passed the Norris-LaGuardia Act and the National Labor Relations Act (NLRA) “to protect workers’ rights to band together when confronting employers about working conditions.”
Employee rights diminished
Faced with arbitration as their only legal recourse, workers will find it difficult to seek back pay for violations of minimum wage and overtime rights and for damages when employers violate anti-discrimination laws.
Lawyers may find it economically unfeasible to file complaints for individual plaintiffs in which judgments or settlements are small. Fearing retaliation from their employers, many workers will likely refrain from taking legal action in the first place. Even if a worker’s complaint makes it to arbitration, research shows that arbitration procedures overwhelmingly favor employers.
A growing trend
According to the Economic Policy Institute, mandatory arbitration agreements in employment contracts have gained momentum since 1991 amid a trend driven by multiple Supreme Court decisions.
In 1992, just 2 percent of employees were bound by mandatory arbitration agreements. However, since the early 2000s, the share of the U.S. workforce subject to forced arbitration agreements has soared to more than 55 percent.
“This trend has weakened the position of workers whose rights are violated, barring access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act,” the Economic Policy Institute observes.