No Class Action: Supreme Court Weighs Whether Workers Must Face Arbitrations Alone

Enlarge this image toggle caption J. Scott Applewhite/AP J. Scott Applewhite/AP

Suing one's employer can be scary enough, but it's even scarier doing it alone.

Many employers are increasingly requiring workers to sign agreements requiring them to resolve workplace disputes about anything from harassment to discrimination to wage theft through individual arbitration. In other words, the language does not permit them to join forces with colleagues who might have similar complaints.

Whether such prohibitions on collective arbitration are legal is at issue in a trio of cases heard by the Supreme Court this week. With Trump-appointed Justice Neil Gorsuch on the bench, many experts say a ruling against the workers in these cases could result in massive changes in how nearly all workplace disputes will be resolved, and how labor laws are enforced.

To understand what this means from the perspective of workers, consider the case against Sterling Jewelers, which operates the Jared, Kay and Zales brands.

Nearly a decade ago, 15 women who worked for Sterling started complaining that they'd been denied pay and promotions given to male counterparts. At the time, they weren't aware of each other's complaints, because at the time of their hiring, they'd all signed paperwork agreeing such complaints could only be heard in private arbitration.

"Most of them had no way of knowing that the others had similar disputes, because that was all kept confidential" in the arbitration process, says Joe Sellers, the women's attorney.

A key turning point in that case, he says, came when the women were permitted to consolidate their case into a class action. They were able to do so because their employment agreements did not explicitly prevent them from joining forces. That meant they could pool resources, hire experts and retain attorneys they couldn't have secured on their own.

Their class-action case now covers 69,000 current and former female Sterling employees, and will be heard next spring. Sellers says if the Supreme Court allows employers to block workers from collectively arbitrating, it would hurt clients like his trying to bring claims in the future.

"They will have no benefit of being able to work together, to collect evidence together, see that there's evidence of a pattern of conduct, which was very important to them in being able to prove their claims, and in leading a number of them to realize they were not alone," Sellers says. "Without it, I think many of them would have simply abandoned their claims because it was either too risky or too expensive or too hard."

Employment arbitration agreements are similar in nature to the fine-print consumer arbitration agreements found in anything from credit card to cellphone contracts, which effectively waive consumers' rights to bring claims to court. After the Supreme Court upheld those arbitration agreements in 2011 and in a subsequent case, employers started adding similar language in employment agreements.

Now, many large employers — from tech giants to retail and restaurant chains — include prohibitions on collective workplace arbitrations. The left-leaning Economic Policy Institute estimates that about 60 million American workers are covered by such agreements, and as many as 25 million of them cannot arbitrate collectively.

"Most workers in the United States aren't even aware of what arbitration is, never mind that they've signed this kind of agreement, maybe on their first day at work in a stack of papers, or maybe through clicking a box through their orientation materials," says Ceilidh Gao, an attorney for the National Employment Law Project, a workers' rights group.

Gao and others say collective action, whether it's union organizing or class-action lawsuits, are a key tenet of labor law, with a long history of government protection. They argue employers should not be able to nullify that by inserting a clause in some paperwork.

Gao says most workers drop their cases, instead of going it alone, which means employers aren't forced to correct systemic workplace violations.

David Seligman, a Denver attorney for Towards Justice, which represents low-wage workers, says many prospective clients come in with complaints that they weren't paid overtime, or were forced to work without pay, but discover they are covered by these employment clauses.

"For many folks, if you don't have the opportunity to act together in a lawsuit against your employer, you're never really going to file a lawsuit at all," he says.

A national arbitrators group also sided with workers' groups in these cases.

"This really could set us back a century," says Matthew Finkin, a professor at the University of Illinois who wrote the friend-of-the-court brief on behalf of the National Academy of Arbitrators in the cases being heard by the Supreme Court.

He says normally, he would expect employers to argue in favor of resolving multiple similar disputes, together, instead of going through many separate, individual arbitrations.

Instead, Finkin says, employers are banking that individuals will simply not bring their cases, and employers will avoid public scrutiny of their poor workplace practices.

Employers argue that individual disputes are resolved faster and cheaper. They say class-action suits can take years in the courts to resolve, and primarily benefit the lawyers who bring such cases.

Harry Johnson III, a former Republican member of the National Labor Relations Board who now represents employers, says class-action claims are often abused, giving a single worker the power to claim they're bringing the dispute on behalf of others.

"If that claim gets aggregated, then that person — regardless of the merits of the case — instantly has a much more valuable case," he says. That leaves employers open to what he calls "blackmail settlements," where a single worker can force a larger settlement simply by threatening collective action.

Johnson argues an employer that is systematically misbehaving would face multiple arbitration cases, which would become expensive, providing sufficient financial incentive to stop the problem behavior.

Employer groups also argue these agreements are contracts that the National Labor Relations Board cannot invalidate.

"There's a bigger issue at stake here, and that is the reach of the NLRB and whether or not it has the authority to reach down into employment contracts to this degree," says Linda Kelly, general counsel for the National Association of Manufacturers.

If the employment agreement is signed by the worker, she says, a contract is still a contract.