The Supreme Court, in a 5-to-4 vote, handed a major win to employers last week with a decision labor law experts are calling the most significant business ruling of this year's term. But for workers, say lawyers who represent them, the decision is a "devastating blow" that will effectively end the ability of millions of workers to band together and challenge their employers on everything from wage disputes to discrimination to sexual harassment claims.
"There’s no doubt about it, it will have a negative effect on working people," said Angela Cornell, director of the Labor Law Clinic at Cornell University's law school. "The consequences are significant. It’s an access to justice issue."
About 60 million workers in this country, according to a study by the left-leaning Economic Policy Institute, are subject to mandatory arbitration agreements with their employers, which require employees to agree to pursue their claims in private arbitration rather than through the courts. The court's decision this week means employees who sign those agreements must fight alleged violations individually, rather than as a group. The ruling was in response to three consolidated cases about wage issues, but comes amid increasing claims of sexual harassment during the #MeToo era.
Forced arbitration agreements would already seem to prevent workers from filing lawsuits in court, and indeed, many companies that have arbitration procedures include a class-action "waiver" that explicitly prohibits workers from pursuing collective action. But until this week, the National Labor Relations Act, which protects "concerted activities," left open the possibility that workers could file collective legal actions nonetheless, and lower courts were divided on the issue.
Yet the Supreme Court's decision "puts the nail in the coffin on the one open question of whether the NLRA would preclude this," said Debra Katz, a Washington lawyer who often represents plaintiffs in sexual harassment lawsuits. "This was the last argument standing."
She and others said the decision is likely to have several lasting effects on workers. Because arbitration is typically handled in secret, public accountability for corporations and transparency on decisions is limited, said Catherine Ruckelshaus, general counsel for the National Employment Law Project, a research and advocacy group. That has the potential to hurt not just workers or their co-workers, Ruckeshaus says, but other businesses.
"Companies that are trying to do the right thing now have to operate in these dark, unknown areas and don’t know where the compliance lines are if their competitors are pushing the limits," she said, suggesting the decision could also "embolden companies that already are pushing the limits of what the law requires because they don’t fear getting caught."
Some media coverage in the lead-up to the decision noted what happened after former Fox News anchor Gretchen Carlson accused the late Roger Ailes of sexual harassment despite a private arbitration clause. (Carlson got around it by suing Ailes personally, rather than the company). When she went public, it sparked other women to come forward, too.
Another likely impact, Ruckeshaus said, is the proliferation of class-action waivers or potentially, the adoption of arbitration agreements at companies that don't already have them. She recalls hearing the general counsel of a major corporation without mandatory arbitration speak on a recent panel.
"He said they didn’t think it was the right thing to do; [the employee] needs to feel like they have a day in court," she recalls. But he also said that if the Supreme Court decided the consolidated cases as they did this week, "he said 'I would be crazy' not to advise [his employer] to have these provisions, especially the class waiver, because it protects the company from liability."
Amy Bess, a partner with Vedder Price in Washington, said she's not yet hearing floods of calls from clients on the issue, but expects employers to make changes.
"This decision really confirms that class action waivers are going to be enforceable," she said, and "those who were on the fence -- this has likely pushed them over the edge and sealed the deal."
According to EPI's estimates, more than half of nonunion, private-sector employers, or 54 percent, have mandatory arbitration procedures, and 65 percent of large companies with more than 1,000 employees have them.
"Large employers are the people who are most worried about class actions," because of their size and scope, said Wendy Coats, Fisher Phillips partner and appellate counsel.
Some legal experts suggested it also would have a "chilling effect" on workers bringing claims overall. When arbitrating individual cases, Katz said, it's often not "economically sufficient enough to warrant a lawyer getting involved," meaning it's "more likely that meritorious claims will not be brought."
Justice Ruth Bader Ginsburg, writing in the court's dissent, expressed several of these concerns, writing that "the inevitable result of today’s decision will be the under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers."
Calling the decision "egregiously wrong," she also wrote that "expenses entailed in mounting individual claims will often far outweigh potential recoveries" and "fear of retaliation may also deter potential claimants from seeking redress alone."
Meanwhile, Justice Neil Gorsuch wrote that the Supreme Court "has never read a right to class actions into the NLRA" and that "as a matter of policy," questions about arbitration and class actions "are surely debatable. But as a matter of law the answer is clear."
Indeed, some believe that a policy debate in Congress -- or in state legislatures -- is where things are headed. Some senators have proposed federal legislation that would curtail the use of arbitration agreements for employees -- whether on particular issues or more broadly -- while other action could come from the states.
"I think you’re going to see more state legislatures start to move to create greater and broader protections for employees," Coats said.
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