Arbitration Everywhere, Stacking the Deck of Justice

New York Times Jessica Silver-Greenberg and Rob Gebeloff
October 31, 2015

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A hunter whose trophies are mounted on the walls of his chambers in Philadelphia’s federal courthouse, Judge Berle M. Schiller prefers to use a bow to catch his prey. He has stalked deer through the Pennsylvania woods, tracked caribou in Quebec and pursued fleet-footed impala through South Africa.

Hunting with a rifle is not a fair fight, ” said Judge Schiller, 71, who applies the same philosophy to his courtroom. Or at least he did until December 2013, when he had to rule on a lawsuit against the owner of 39 Applebee’s restaurants in Pennsylvania.

The class action was brought by a former waiter on behalf of other low wage employees. The waiter, Charles Walton, said Applebee’s made workers sweep floors, stock silverware, scrub booths and empty trash cans, but did not pay them a fair wage for the extra tasks. The Applebee’s employees, who relied on tips, often ended up making less than minimum wage. Employment lawyers said these practices were widespread in the restaurant industry.

The Rose Group, which owned the restaurants, defended its practices and urged Judge Schiller to dismiss the lawsuit since Mr. Walton signed an employee contract that included a mutual promise to resolve claims by binding arbitration. ”

The request troubled Judge Schiller. It is just these kinds of cases where it’s important to have a jury, ” he said.

Applebee’s franchises, run by different owners, have faced similar class actions in Alabama, Florida, Illinois, Kentucky, Missouri, New York, South Carolina and Rhode Island.

In 2014, Ronnie Del Toro brought a case while working as a waiter in the Bronx. Once again, Applebee’s sought to have it thrown out.

In the meantime, Mr. Del Toro said the restaurant’s owner and two hulking men, including one who went by Big Drew, ” confronted him on the job. They warned him to stop being a little bitch ” and withdraw his lawsuit, according to an application for a restraining order that Mr. Del Toro filed in a Bronx court.

I didn’t wait to hear anymore, ” said Mr. Del Toro, who moved to Brooklyn and got the restraining order.

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Mr. Del Toro now works at P.F. Chang’s, another restaurant chain. He had to sign an employment contract with an arbitration clause to get the job.

Class-action bans are also widely included in the employment policies of retailers, including Macy’s, Kmart and Sears.

Even some N.F.L. cheerleaders have had to agree to them. When a group of cheerleaders sued the Oakland Raiders over working conditions, they discovered that Roger Goodell, the N.F.L. commissioner, would preside over the arbitration. The Raiders later agreed to use someone else.

The use of class-action bans is spreading far beyond low-wage industries to Silicon Valley and Wall Street, where banks like Goldman Sachs require some executives to sign contracts containing the clauses.

Civil rights experts worry that discriminatory labor practices will go unchecked as class actions disappear.

Cases brought by African-American employees against Nike in 2003 and Walgreens in 2005, for example, led the companies to change their policies. The drug company Novartis paid $175 million to settle a class action brought by female employees over promotions and pay.

Jenny Yang, chairwoman of the Equal Opportunity Commission, said arbitration allowed root causes ” to persist. Part of the problem, Ms. Yang said, is that arbitration keeps any discussion of discriminatory practices hidden from other workers who might be experiencing the same thing. ”

The point was not lost on Judge Schiller in Philadelphia, who has handled many employment cases in his 15 years on the bench. Once an arbitrator himself for disputes between companies, the judge said he had nothing against the forum, as long as both sides wanted to go.

Among thousands of employees at Applebee’s franchises, only four took the company to arbitration between 2010 and 2014, according to The Times’s review of arbitration data.When lawyers for Applebee’s argued before Judge Schiller to have the lawsuit thrown out, they assured him that Mr. Walton, who brought the suit, could have turned down the job and not agreed to the arbitration clause.

Judge Schiller was not persuaded. To suggest that he had bargaining power because he could wait tables elsewhere ignores reality, ” the judge wrote in court papers. The Applebee’s workers, the judge wrote, must chew on a distasteful dilemma ” of whether to give up certain rights or give up the job. ”

Despite his own objections, Judge Schiller said he was bound by the Supreme Court decisions. In his ruling, he noted the lamentable ” state of legal affairs and dismissed the case.

With no other option, Mr. Walton took his case to arbitration. In April, he lost.