Supreme Court to Rule on Employee Arbitration Clauses
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UPDATED: May 6, 2017
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The U.S. Supreme Court has agreed to rule on whether companies can use arbitration clauses in employee contracts to prevent workers from presenting their disputes to courts and juries.
As I’ve discussed in previous blogs, although arbitration may sound like a good idea (it’s intended to be faster and cheaper than conventional litigation), it can be used to deprive consumers of their rights.
For example, as I wrote here, Fox News cited an arbitration clause in the employment contract of former host Gretchen Carlson in an effort to throw out her suit claiming sexual harassment by her former boss, Roger Ailes.
As the New York Times reported, the high Court accepted three cases involving arbitration clauses in employment agreements. The Court has previously ruled on arbitration clauses in other types of consumer contracts.
In a 2011 case, the Court ruled that the Federal Arbitration Act (which favors arbitration clauses), allows companies to avoid facing class action lawsuits via the use of arbitration clauses.
$30 for a “Free” Phone
In that case, a couple who objected to a $30 charge for what was supposed to be a “free” cellphone were prohibited from joining with other similarly unhappy consumers to bring a class action against the company offering the “free” phones.
As the Times notes,
the challenged contracts typically require two things: that disputes be raised through the informal mechanism of arbitration rather than in court and that claims be brought one by one. That makes it hard to pursue minor claims that affect many people, whether in class actions or in mass arbitrations.
Arbitration clauses are also common in other contexts, including nursing home contracts, as I discussed here.
Deprivation of Rights
In a 2015 case in which the Court enforced an arbitration clause in consumer contracts with DirecTV, Justice Ruth Bader Ginsburg dissented, saying that arbitration clauses
have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.
She also cited a New York Times series about how arbitration clauses can “stack the decks of justice” for consumers, including employees.
As the Times noted in the cited article,
A top executive at Goldman Sachs who sued on behalf of bankers claiming sex discrimination was also blocked [from suing], as were African-American employees at Taco Bell restaurants who said they were denied promotions, forced to work the worst shifts and subjected to degrading comments.
Is Employment Different?
In the three new cases before the Supreme Court, the plaintiffs have argued that employment contracts are different from other types of consumer contracts.
The plaintiffs contend that the National Labor Relations Act protects employees’ rights to engage in “concerted activities,” which they interpret to include class action lawsuits.
Two federal circuit courts have accepted that argument, but a third appeals court rejected it. It will be up to the Supreme Court to resolve that conflict between the lower courts.
The Obama administration, via the National Labor Relations Board, supported the position of the employees.
The Trump administration has not yet announced a position on the case. However, according to Bloomberg BNA,
Trump and his businesses seem to have been big proponents of arbitration, using it as a way of getting disputes out of courts and therefore out of the public eye.
For more information on a Trump presidency and arbitration, read the following articles: