Arbitration Provisions Prohibit Most U.S. Workers from Suing their Employers

Edgar M. Rivera, Esq.

Arbitration between employees and employers favors employers’ interests at employees’ expense. Ostensibly, arbitration merely requires that any employment claims be litigated in a private forum; in reality, it discourages employees from suing their employers because, as compared to litigation, employees are less likely to win and generally recover lower damages. As such, many employers require their employees to sign arbitration agreements.

Indeed, a report from the Economic Policy Institute has found that, since the early 2000s, the number of workers subject to mandatory arbitration has more than doubled, covering 60 million U.S. private-sector non-union workers. These agreements prevent 55 percent of U.S. workers from accessing the courts to protect their employment rights.  This figure increases to 65.1 percent among large companies—those with 1,000 or more employees.  Of the employers who require mandatory arbitration, 30.1 percent also include class action waivers in their procedures—meaning that about 25 million employees also lose the right to address widespread employment rights violations through class action.  For large companies, the number of employees subject to class action waivers increases to 41.1 percent. In total, 23.1 percent of private-sector non-union employees no longer have the right to bring or participate in a class action against their employers.

“This trend has weakened the position of workers whose rights are violated, barring access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act,” states Cornell professor Alexander J. S. Colvin, the author of the report. Notably, while the number of employees subject to arbitration agreements has increased, the number of arbitration proceedings filed has not, meaning that employment arbitration agreements are, in fact, suppressing employees from bringing claims against their employers. Research has found that arbitrations overwhelmingly favor employers, as they are the ones who define the mandatory arbitration procedures and select the arbitration providers.

Today, October 2, 2017, the Supreme Court will hear a set of consolidated cases—NLRB v. Murphy Oil USA, Inc., Epic Systems Corporation v. Lewis, and Ernst and Young LLP v. Morris—challenging the inclusion of class action waivers in arbitration agreements on the grounds that these waivers violate the protection of the right to engage in concerted action contained in Section 7 of the National Labor Relations Act (NLRA).  The Court’s ruling will address the tension between the NLRA, which, among other things, provides workers with the right to form unions without discrimination, and the Federal Arbitration Act, which favors enforcement of all arbitration agreements.

It is important that all working people review any paperwork that they receive during their employment or the hiring and interview process. Having or not having an arbitration provision could mean the difference between winning and losing claims against your employer.  If you need assistance negotiating or litigating an employment agreement, contact The Harman Firm, LLP.