By a 5-4 vote, the Supreme Court ruled Monday that employer-promulgated individual arbitration procedures that require employees to waive the right to class actions are lawful. Such mechanisms are in poor repute because of their one-sidedness—even Uber has discontinued them for sexual harassment claims though, inconsistently, not for other employee grievances.
In arriving at its holding in Epic Systems v. Lewis, the Court has snuffed out employee rights to band together in a concerted way to enforce laws providing for minimum wages and maximum hours, prohibitions against discrimination for race, sex, religion or age, and other protections like those provided in wrongful discharge actions.
The importance of this is twofold: government agencies like the Equal Employment Opportunity Commission and the Department of Labor, which have responsibility for enforcing many of these laws, are perennially underfunded. As the Supreme Court has previously noted, this puts workers in the critical role of private attorney generals. Moreover, class actions through which worker claims can be bundled together are essential to private enforcement, since the cost and expense involved in individual proceedings generally wipes out adequate recompense to worker and lawyer.
The dirty little secret of Justice Neil Gorsuch’s opinion for the court (exposed in part by Justice Ruth Ginsburg’s dissenting opinion) is that for the past quarter century, employers, confronted by a rising tide of employment litigation that has obtained monetary remedies including punitive and compensatory damages beyond back pay, have devised the requirement that employees sign these waivers as a condition of employment. The prohibition against class action proceedings, whether in arbitration or the courts, is designed to eliminate or substantially diminish liability exposure.
That was the procedure in question that the court ratified through its holding—not true bilateral arbitration that results from an agreement negotiated between an employee or labor organization with management—a process properly promoted by the court since 1960. The issue before the court involved “unbargained for” mechanisms, as Ginsburg put it, between unequals and their compatibility with National Labor Relations Act protections.
A number of fig leaves were carefully placed over this reality by the Gorsuch opinion. First, the court said that the right of workers to engage in “concerted” or group activity protected by the NLRA had nothing to do with litigation, erroneously characterizing that law as concerned only with unions and union-related protests. But as Ginsburg’s dissent properly noted, the NLRA has long protected employee protests about working conditions, including those that run afoul of other employment statutes like anti-discrimination and minimum wage laws. Moreover, these new “unbargained for” arbitrations are strikingly similar to the “yellow dog” contracts of a century ago under which employees were required not to join a union as a condition of employment. The same one-sided features today require employees to surrender their rights if they want to keep a job.
A second fig leaf consisted of the court’s reliance upon an NLRB General Counsel memo that held that such contracts were lawful. The court did not understand (or choose to understand) that the General Counsel, a kind of statutory prosecutor, does not speak for the quasi-judicial board, which possesses specialized expertise as an interpreter of law. Indeed, the board’s view was to the contrary.
For the past two decades (particularly since 2011), the court has consistently undercut the right of workers to bring class actions — the most recent ruling is one last nail in the coffin burying New Deal and Great Society legislation.
Thus, until a future Congress and president seize the day, the reality will be as Ginsburg described it:
“Employers, aware that employees will be disinclined to pursue small-value claims when confined to proceeding one-by-one, will no doubt perceive that the cost-benefit balance of underpaying workers tips heavily in favor of skirting legal obligations.”