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The Supreme Court Just Dealt a Blow to 25 Million Workers

Employment contracts can bar class-action lawsuits.

People wait in line to attend the fall session of the US Supreme Court, on October 2, 2017, in Washington, DC.

The Supreme Court’s conservative majority just made it a lot harder for millions of nonunion workers to collectively challenge their bosses in court over lost wages, workplace discrimination, sexual harassment and other disputes.

In a 5-4 decision on Monday, the court ruled that mandatory arbitration clauses in employment contracts do not violate federal labor law. Mandatory or “forced” arbitration agreements require workers to waive their right to file class-action lawsuits against employers if they want to get and keep their jobs, and instead enter into arbitration proceedings as individuals to seek justice and settle disputes.

The ruling was a major victory for employers in a case that pit labor and civil rights groups against big business and the Trump administration’s Justice Department, which flipped its position on the case after Trump replaced Barack Obama in the White House.

The ruling comes amid a national conversation about discrimination in the workplace as employees continue to speak out about sexual harassment despite non-disclosure clauses in forced arbitration agreements, which have been loudly criticized for silencing women and LGBTQ people.

For example, Uber recently announced that it would no longer require mandatory arbitration in private for sexual harassment claims after coming under pressure from the #MeToo movement, and Lyft quickly announced it would follow suit.

Mandatory arbitration agreements often prevent workers from coming together to file lawsuits against employers under the Fair Labor Standards Act, the Civil Rights Act, the Family and Medical Leave Act and other laws meant to protect workers, according to Celine McNicholas, director of labor law and policy at the Economic Policy Institute.

Instead, workers are forced to air their grievances individually in arbitration processes set up as alternatives to courtroom disputes. Pro-labor groups say arbitration often favors employers, particularly when unions are not involved. Lawyers also tend to be less interested in representing workers taking up small claims on their own than a class-action case that could secure significant damages.

“This means that a worker who is not paid fairly, discriminated against, or sexually harassed, is forced into a process that overwhelmingly favors the employer — and forced to manage this process alone, even though these issues are rarely confined to one single worker,” McNicholas said in a statement.

The Economic Policy Institute estimates that more than half of all nonunion workers in the United States have signed mandatory arbitration agreements, and Monday’s ruling could affect nearly 25 million workers nationwide.

The court considered three cases where employees filed class-action lawsuits for lost overtime pay despite mandatory arbitration agreements, including one in which the National Labor Relations Board ruled that an arbitration agreement violated the National Labor Relations Act. The board defended its decision, arguing that the labor law passed in 1935 protects workers’ right to work together for better wages and working conditions, including through class-action lawsuits.

However, the court’s conservative justices argued the Federal Arbitration Act of 1925 trumps the nation’s foundational labor and collective bargaining law, which they view as more narrowly tailored toward union workers. Congress passed the Federal Arbitration Act a decade earlier to give employers the power to settle disputes through private arbitration and prevent collective legal action from employees.

“As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear,” wrote Justice Neil Gorsuch, a Trump appointee, in the opinion for the majority. “In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms — including terms providing for individualized proceedings.”

Writing in dissent for the court’s four more liberal justices, Justice Ruth Bader Ginsberg said the ruling was “egregiously wrong.” She argued that individual claims of lost wages, for example, are “scarcely of a size warranting the expense of seeking redress alone,” but by banding together, workers can effectively seek redress for wage underpayment that is common across various industries.

The Federal Arbitration Act, the dissenting justices argued, does not give employers cover to violate workers’ right to protect their interests in concert by forcing them to sign “take-it-or-leave-it” contracts requiring mandatory arbitration as a condition of employment.

“The inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers,” Ginsberg wrote. “The probable impact on wage and hours claims of the kind asserted in the cases now before the Court is all too evident. Violations of minimum-wage and overtime laws are widespread.”

Proponents say mandatory arbitration prevents costly litigation and, without it, employers would get rid of arbitration altogether, robbing nonunion works of their only option for a quick and uncostly resolution to workplace disputes outside the courtroom. However, the NAACP argued in a brief filed with the court that forcing workers to challenging discrimination alone and outside the courtroom poses a serious threat to civil rights enforcement.

Proving workplace discrimination, particularly on grounds of race and gender, usually requires identifying a “disparate impact” on a certain group or a common pattern of practice that disproportionately affects certain workers. Providing evidence of discrimination on the job is much more difficult when workers must present their cases one-by-one and in private, rather than by sharing their stories and working together.

For decades, concerted efforts by workers to assert their rights have effectively challenged racial and gender discrimination at job sites across the country, forcing large employers to change their ways, according the to the NAACP.

“If employers can preclude workers from acting together in every forum, they can — and will — effectively extinguish the civil rights claims of the most vulnerable members of the workforce,” the NAACP wrote.

Echoing the dissenting justices, McNicholas said Congress should restore the right to engage in “collective action” for millions of workers by banning mandatory arbitration agreements, but such legislation is unlikely as long as Republicans control Congress.

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