A case is being argued in Chicago Friday that could shape the future of class action lawsuits for workers — a type of redress that in the last few years has become, in many contexts, nearly impossible to pursue.
To understand the problem, consider the situation of low-paid temporary staffing agency employees in the Windy City. Yolanda Carrillo, legal director of a coalition of worker centers called the Raise the Floor Alliance, hears often about employers skirting the law — shorting paychecks, improperly classifying employees as contractors, discriminating against various classes of people. “Generally, the violations were low, but it was happening to lots of workers,” Carrillo says.
Historically, the legal system has a fix for this: Workers who’ve been wronged in the same way by the same employer can join a class action lawsuit. But that’s become increasingly difficult in recent years, as employers have sought to reduce their exposure to lawsuits by including clauses in their employment contracts requiring all disputes — on questions of law, not just contractual terms — to go in front of a private arbitrator, rather than in front of a judge in a public court.
The arbitrators are usually hired by the companies being sued, and as documented in a massive series by the New York Times last summer, more often tend to rule in favor of the one paying the bills. In addition, workers have to file their own individual claims, which tend not to be attractive enough for private attorneys to take on contingency. “So it would be too costly, and you’re not guaranteed that it would win,” Carrillo explains. “Do they technically have the right to do it? Sure, but not in reality.”
That brings us back to the case going before the 7th Circuit Court of Appeals. This one concerns a medical software development company called Epic Systems, which in April 2014 rolled out a new clause in its employment contracts requiring all disputes to go through individual arbitration. When employees upset about a lack of overtime pay filed a class action lawsuit anyway, a district court ruled that the clause violated the National Labor Relations Act’s protection of workers’ right to organize collectively for better wages and working conditions.
That was an unusual decision. While National Labor Relations Board has been throwing out mandatory arbitration clauses left and right over the past couple years, it has been consistently reversed by federal judges, which have deferred to the Supreme Court’s unbroken record of upholding freedom of contract in other contexts — which, in situations where a worker or a consumer doesn’t have the power to negotiate over fine print, tends to favor the business.
“The Supreme Court has made it clear that arbitration agreements between an individual and a company that does this thousands of times a year is just as enforceable as if it were two private entities,” says Griffin Pivateau, an assistant professor of legal studies at Oklahoma State who has written extensively about the issue. “It’s all being driven from the top down, and with that in mind, courts are bound to respect arbitration agreements.”
The NLRB also filed an amicus brief in this case, outlining its argument that mandatory arbitration violates labor law. And the Madison, Wis.-based employee-side law firm Hawks Quindel, one of two firms working on the case, is optimistic that the 7th Circuit might agree — which would likely give the Supreme Court the chance to decide the question once and for all.
"These class action bars in arbitration agreements are a huge issue for those of us representing employees in Fair Labor Standards Act claims,” says attorney David Zoeller. "In practice, employers are able to continue to violate the law with relative impunity.”
But if recent precedent is any guide, legal scholars say that the Supreme Court would likely stick to its pro-arbitration tendencies. In the meantime, Democratic senators have introduced bills to change the law — prohibiting mandatory arbitration when an employer is charged with violating a law rather than just a contract provision, or in employment and consumer cases — but those aren’t going anywhere in the current political environment either.
“Short of the Supreme Court changing or there being a dramatic change in the composition of Congress, you’re not going to see a big change in employment contracts,” says Paul Bland, executive director of Public Justice, which has crusaded against mandatory arbitration for years. “One thing that’s really brave is that the NLRB is speaking to its position, and continuing to do what it thinks is right.”