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Class Waiver Ruling Could Backfire On Businesses: Panel

Law360—Braden Campbell

Though they’re celebrating the decision as a win, employers may not like the legal response to the U.S. Supreme Court’s recent ruling that businesses can make workers sign away their rights to file class suits as a condition of employment, panelists said Wednesday at an American Arbitration Association conference.

Adam Klein, deputy managing partner of worker-side employment firm Outten & Golden LLP, said at a panel in New York on the future of class actions that the plaintiffs’ side of the bar is already cooking up ways to make employers who use these class action waivers regret foregoing collective litigation in favor of individual arbitration.

“You go to court … it’s entirely free, you have a judge, clerks, court staff," Klein said. “[If employers say] we’re not going to do that, we’re going to go to private arbitration … I think this is a be careful what you ask for dynamic. That [arbitration] costs money. That costs a lot of money, particularly when aggregating small-value claims.”

Moderator Alexander Colvin, an associate dean at the Cornell University School of Industrial and Labor Relations, said Wednesday’s panel was well-timed coming two days after the high court’s conservatives said the National Labor Relations Act doesn’t block arbitration agreements that include class action waivers.

Monday's decision came in a trio of cases that involved Murphy Oil USA Inc., Epic Systems Corp. and Ernst & Young. Writing for the majority, Justice Neil Gorsuch said that mandatory arbitration agreements have to be enforced under the Federal Arbitration Act.

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Klein conceded Wednesday that the ruling is in some ways a victory for employers. By limiting the size of a given action, he said, employers minimize their potential payout. But if a hundred workers who would have been part of a class action instead file claims in arbitration, things could get pricey for employers.

“[Individual arbitration] may be worse for employers,” Klein said. “I wouldn’t bet against it.”

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In theory, class action waivers also limit employers' risks because plaintiffs’ attorneys are less likely to help workers through arbitration. While it’s sometimes worth the risk to take on class actions where each worker alleges they're owed a few hundred to a few thousands of dollars, it may not be economical to take on these cases individually.

But worker groups and unions may band together to bankroll small wage cases, much like the National Women’s Law Center has launched the Time’s Up Legal Defense Fund to help low-income women bring sex-based claims against their employers, Klein said.

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