Supreme Court Divided on Arbitration for Workplace Cases
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In its first argument of the new term, the Supreme Court on Monday considered whether to give employers a powerful tool to bar class actions over workplace issues.

The court’s decision on the matter could affect some 25 million employment contracts. A ruling in favor of employers, Justice Stephen G. Breyer said, could cut out “the entire heart of the New Deal” and undo an understanding of labour relations with roots in the administration of President Franklin D. Roosevelt.

The case is the court’s latest attempt to determine how far companies can go in insisting that disputes be resolved in individual arbitrations rather than in court.

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The Supreme Court ruled in earlier cases that companies doing business with consumers may require arbitration and forbid class actions in their contracts, which are often of the take-it-or-leave-it variety. Such contracts typically require two things: that disputes be resolved by arbitration 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 arbitration.

Justice Ruth Bader Ginsburg said there was often no point in pursuing individual arbitration because the sums at issue were too small.

“There is strength in numbers,” she said. “We have to protect the individual worker from being in a situation where he can’t protect his rights.”

Jeffrey B. Wall, a deputy solicitor general who argued in favor of the employers, acknowledged that it was sometimes a consequence of arbitration agreements “that the employees would be practically unable to vindicate their claims.” He added that the Supreme Court had said as much about arbitration clauses generally in a 2013 decision concerning an agreement among businesses.

Arbitration clauses with class-action waivers are now commonplace in contracts for things like cellphones, credit cards, rental cars and nursing home care.

In a 2015 dissent, Justice Ginsburg, citing a New York Times article examining arbitration agreements, wrote that the court’s decisions favoring arbitration “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.”

The court’s earlier arbitration decisions were closely divided, with its conservative members in the majority.

The question for the justices on Monday was whether they should use a different approach for employment contracts. The answer depends on the interaction of two federal laws. One, the Federal Arbitration Act, favours arbitration. The other, the National Labour Relations Act, protects workers’ rights to engage in “concerted activities.”

Workers seeking to sue their employers for overtime pay and the like say the second law prohibits arbitration clauses that require class-action waivers.

Justice Anthony M. Kennedy seemed to be ready to side with employers. Justice Neil M. Gorsuch, the court’s newest member, asked no questions.

Paul D. Clement, a lawyer for the employers, said the labour law was “directed to the workplace, not the courthouse.”

Justice Ginsburg said the arbitration law was concerned with agreements between merchants of relatively equal bargaining power. The employment contracts at issue in the case, she said, have been forced on workers.

“There was no true liberty of contract,” she said.

Monday’s argument concerned three cases: Epic Systems Corporation v. Lewis, No. 16-285, Ernst & Young v. Morris, No. 16-300 and National Labor Relations Board v. Murphy Oil USA, No. 16-307.

The cases, which were consolidated for a single hour of argument, featured an unusual element: Lawyers for the federal government appeared on both sides.

The Obama administration had filed a brief supporting the workers on behalf of the National Labor Relations Board. The Trump administration reversed course, and Mr. Wall argued on behalf of the employers.

The labour board’s general counsel, Richard F. Griffin Jr., argued for the workers. He made a concession at odds with the position of another lawyer on his side.

Mr. Griffin said that employment contracts could not require workers to give up collective action in arbitration but that the private entities that conduct arbitration could require that cases be pursued one by one.

If that is so, Justice Samuel A. Alito Jr. responded, “You have not achieved very much because, instead of having an agreement that says no class arbitration, you have an agreement requiring arbitration before the XYZ arbitration association, which has rules that don’t allow class arbitration.”

Daniel R. Ortiz, a law professor at the University of Virginia who also argued for the workers, took a different approach.

“When an employer tries to coerce by making it a condition of continued employment that employees agree to a set of arbitral rules that make collective action impossible,” he said, that would be unlawful.

Some justices suggested that workers could band together in a limited sense by hiring the same lawyer and filing individual arbitration cases.

Justice Elena Kagan said that was not good enough.

“The fact that there is one way to exercise a right left over does not make it O.K. if we’ve taken away another 25 ways of exercising the right,” she said. “You know, when we think about the First Amendment, we don’t say we can ban leafleting because you can always write an op-ed.”


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