WHY YOU SHOULD BE CONCERNED ABOUT ARBITRATION CLAUSES

This week, a divided Supreme Court announced its decision in Epic Systems Corp.v. Lewis, affirming the principle of private contract over the interests of the class-action legal industry. This decision means that each of the Obama administration’s major efforts to enable class-action lawsuits have now been undone. Companies are now provided with more room to add arbitration clauses to contracts that state an individual who settles in arbitration cannot then pursue a class action lawsuit. 

This ruling constitutes an endorsement of the Trump administration’s position that employers are entitled to waive their employees’ right to file class-action lawsuits under the 1925 Federal Arbitration Act (FAA). The Obama administration, as well as the organized-labor movement, had argued that the National Labor Relations Act trumped the FAA and guaranteed employees’ right to collective action (meaning, class action lawsuits).

So, what is a class action lawsuit?

A class action lawsuit is when numerous parties can bring claims against one party that has allegedly caused them harm. 

What is the difference between a claim being settled in a class action lawsuit vs. arbitration?

Through arbitration, a claim is settled between the company leadership, the person bringing the claim forward, and the litigator. Often, these arbitrations are kept confidential, unlike a class action lawsuit, which is conducted publicly in court. 

Not only does this decision generally provide more incentive to employers rather than employees, but it could have serious implications to the #MeToo and other social justice movements.

Class-action employment lawsuits tend to benefit lawyers and hurt the average worker by acting as an implicit tax on employment. Gretchen Carlson, the first person to step forward with sexual harassment allegations against the late Fox News C.E.O Roger Ailes, spoke on Girlboss Radio about how companies attempt to use arbitration clauses to settle claims (and most importantly, keep the allegations confidential). Think about whether or not the #MeToo movement would be anything without the stories of other women who came forward.

Following this week's decision, Justice Neil Gorsuch wrote the majority opinion, citing earlier SCOTUS rulings that protected employers’ ability to require that their employees surrender their right to pursue class-action litigation as a condition of their employment. 

Gorsuch wrote, “The respective merits of class actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide."

In a rare spoken dissent, Justice Ruth Bader Ginsburg referred to the majority opinion as “egregiously wrong.”

Gorsuch dismissed Ginsberg’s assertion that the decision will constrain employees’ collective-bargaining rights. 

With all of this, it is still important to keep in mind that Congress does have the power to modify the degree to which private parties can contract around such lawsuits.