The U.S. Supreme Court’s decision to legalize class action waivers in mandatory arbitration agreements suddenly hits play on numerous paused lawsuits by workers against their bosses.
Attorneys estimate that anywhere from hundreds to thousands of federal and state lawsuits or arbitration claims were on hold, awaiting the May 21 landmark ruling. In many of those cases—including wage-hour complaints against tech giants Uber, Grubhub, and Amazon—judges agreed to halt the lawsuits, pending the outcome that the justices have now provided.
Now lawyers for plaintiffs and management can dust off the litigation and grievances. They may also begin resolving the claims by arbitrating them one worker at a time.
In a 5-4 vote, the Supreme Court said companies can require their workers to go through individual arbitration to pursue any legal claims against their employers, rather than go to court or join together in class lawsuits or grievances. The decision has particular ramifications in the wage-and-hour realm, where for the past few decades, employees have increasingly united with current or former coworkers to allege companies should be on the hook for failing to pay the minimum wage or time-and-a-half overtime.
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Long-term, the consequences of the court’s decision will be gradually determined as businesses that don’t include class action waivers in their employment contracts decide whether to use the new legal clarity on the issue as a motive to start requiring their employees to sign waivers as a job condition. In the short term, the impact will come from the revived grievances and existing private court cases, many of which lawyers predict will now shift to arbitration.
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Arbitration Not Automatic
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Four Murphy Oil workers alleging that the company violated wage and hour law saw their court case tossed in 2010. The court said the lawsuit was barred by a class action waiver the workers signed when they started with the company.
One of those workers then filed a complaint with the National Labor Relations Board, which agreed with the worker that the waivers violated his right to engage in concerted activity with coworkers under federal labor law. The Supreme Court disagreed.
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The other two companies involved in the May 21 Supreme Court ruling were health-care software company, Epic Systems Corp., and accounting firm Ernst & Young LLP.
Fear of Retaliation
Justice Ruth Bader Ginsburg dissented in the 5-4 ruling, writing for the court’s minority. She highlighted her concern that as a result of the majority opinion, workers that had joined a class action may fear retaliation and won’t seek redress through the arbitration process.
Ginsburg’s words resonated with Justin Swartz, who co-chairs the class action practice group at plaintiffs’ firm Outten & Golden. He will now be advising workers in cases that were stayed until the Supreme Court weighed in May 21.
“Our advice is they will not be able to proceed as a class action and that the best way to vindicate their rights is to file an individual arbitration, if they are not worried about retaliation and they can afford to do it alone,” Swartz told Bloomberg Law.
“But, as justice Ginsberg noted, most individuals will not be able to vindicate their rights and recover lost wages because most individuals do not have the means to litigate against their employers by themselves,” Swartz said. “And most wage-and-hour claims are not big enough to justify individual arbitration.”