Forced arbitration is abused by employers to disempower workers and to keep secrets. It was a concern about these abuses that led members of Congress last year to sponsor legislation to ban the use of mandatory-arbitration agreements to settle sexual-harassment and discrimination claims out of court. In proposing the legislation, Senator Kirsten Gillibrand explained: “When a company has a forced arbitration policy, it means that if a worker is sexually harassed or sexually assaulted in the workplace, they are not allowed to go to court over it; instead, they have to go into a secret meeting with their employer and try to work out some kind of deal that really only protects the predator. They are forbidden from talking about what happened, and then they are expected to keep doing their job as if nothing happened to them. No worker should have to put up with such an unfair system.”
The Ending Forced Arbitration of Sexual Harassment Act of 2017 now has 17 cosponsors in the Senate (including South Carolina Republican Lindsey Graham), while a parallel measure in the House, sponsored by Illinois Democrat Cheri Bustos, has 15 cosponsors.
Congressional efforts to end mandatory arbitration in harassment cases have begun to open up a necessary discussion with regard to the broad threat that these agreements pose to the rights of all workers. Unfortunately, the Supreme Court just weighed in on the wrong side of the debate. The high court ruled this week that companies may use arbitration clauses in employment contracts to bar workers from taking legal action to address mistreatment by employers.
Gillibrand was among the first to respond, noting that “This decision could have devastating consequences for workers, who might now be forced to choose between keeping their jobs and pursuing justice over discrimination or sexual harassment cases.”
The senator’s use of the words “could” and “might” is appropriate. The consequences of this ruling are not yet fully understood. But they are clearly serious, and clearly threatening, for tens of millions of American workers.
The Court’s action invites arbitration abuse. It also creates uncertainty where there should be clarity. While Justice Ruth Bader Ginsberg has suggested that the decision does not “place in jeopardy” discrimination claims that can only be proven through class action, the issue was not addressed in Justice Neil Gorsuch’s decision for the majority. A Bloomberg News analysis concludes that “the impact on civil rights claims is likely to be a subject of future court fights.”
Even as employment-law experts debate the potential consequences, the chilling effect on employees in non-union workplaces cannot be underestimated.
This 5-4 decision with regard to a trio of cases stemming from the practices of Epic Systems, Ernst & Young, and Murphy Oil USA is bad news for working Americans. Conservative justices have tipped the balance toward employers in disputes with workers. Justice Ginsburg characterized the majority’s reasoning as “egregiously wrong” in that it “holds enforceable” what she described as “arm-twisted, take-it-or-leave-it contracts—including the provisions requiring employees to litigate wages and hours claims only one-by-one.”
Justice Ginsburg’s dissent explains what the majority was got wrong:
The employees in these cases complain that their employers have underpaid them in violation of the wage and hours prescriptions of the Fair Labor Standards Act of 1938 (FLSA), 29 U. S. C. §201 et seq., and analogous state laws. Individually, their claims are small, scarcely of a size warranting the expense of seeking redress alone. See Ruan, What’s Left To Remedy Wage Theft? How Arbitration Mandates That Bar Class Actions Impact Low-Wage Workers, 2012 Mich. St. L. Rev. 1103, 1118–1119 (Ruan). But by joining together with others similarly circumstanced, employees can gain effective redress for wage underpayment commonly experienced. See id., at 1108–1111. To block such concerted action, their employers required them to sign, as a condition of employment, arbitration agreements banning collective judicial and arbitral proceedings of any kind. The question presented: Does the Federal Arbitration Act (Arbitration Act or FAA), 9 U. S. C. §1 et seq., permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations Act (NLRA), 29 U. S. C. §151 et seq., “to engage in … concerted activities” for their “mutual aid or protection”? §157. The answer should be a resounding “No.”
In the NLRA and its forerunner, the Norris-LaGuardia Act (NLGA), 29 U. S. C. §101 et seq., Congress acted on an acute awareness: For workers striving to gain from their employers decent terms and conditions of employment, there is strength in numbers. A single employee, Congress understood, is disarmed in dealing with an employer. See NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, 33–34 (1937). The Court today subordinates employee-protective labor legislation to the Arbitration Act. In so doing, the Court forgets the labor market imbalance that gave rise to the NLGA and the NLRA, and ignores the destructive consequences of diminishing the right of employees “to band together in confronting an employer.” NLRB v. City Disposal Systems, Inc., 465 U. S. 822, 835 (1984).
By closing off avenues for challenging unfair practices, the Xourt further undermines the position of America’s most vulnerable workers.
The three women on the Court—Justices Ginsburg, Sonia Sotomayor, and Elena Kagan—were joined by Justice Stephen Breyer in rejecting the premise that employers can use arbitration agreements signed by workers to block class-action lawsuits and other legal initiatives that might address workplace issues such as wage theft.
Fatima Goss Graves, the president of the National Women’s Law Center, bluntly declares that “the Supreme Court has taken away a powerful tool for women to fight discrimination at work.”
“Instead of banding together with coworkers to push back against sexual harassment, pay discrimination, pregnancy discrimination, racial discrimination, wage theft, and more, employees may now be forced behind closed doors into an individual, costly—and often secret—arbitration process,” explains Graves. “This will stack the deck in favor of the employer. For all working people, the right to join a class or collective action is an indispensable tool to advance fairness, justice, and equality at work.”
For women workers, however, Graves notes that “the stakes are particularly high. Women often face discrimination that is difficult to detect, like pay discrimination, or suffer from sexual harassment and face retaliation for reporting it. As mandatory arbitration is forced on growing numbers of employees as a condition of employment, the Supreme Court should strengthen rather than undermine the rights of workers to challenge insidious and often widespread civil rights violations.”
The high court ruling illustrates the importance of upcoming US Senate races, in which voters will decide whether to check and balance President Trump’s determination to pack the Court with justices like Gorsuch. It also shows why it matters to elect members of Congress who will write laws that protect all workers.
“The inevitable result of today’s decision is that there will be huge underenforcement of federal and statutes designed to advance the well-being of vulnerable workers,” Ginsburg wrote in her dissent. “Congressional action is urgently needed in order to correct the court’s elevation of the Arbitration Act over workers’ rights to act in concert.”
That’s a plea for members of the House and Senate to address the harm done by the Court’s reckless and confusing decision. They can start by stepping up the drive to enact the Ending Forced Arbitration of Sexual Harassment Act of 2017. But they should not stop until they have made it clear that corporations must never use arbitration agreements as tools for denying rights and protections to workers.