The Supreme Court Did Workers a Favor

(Bloomberg Opinion) -- On its surface, the Supreme Court’s 5-4 decision in Epic Systems v. Lewis, handed down Monday, looks like a significant defeat for workers. In ruling that companies can require employees to resolve contract disputes through arbitration, rather than class-action lawsuits, the Court limited the ability of workers to band together in court to pursue overtime and other statutory claims. Yet Epic Systems may well prove beneficial to workers, a qualified blessing in disguise. 

Class actions enable lawyers to bring suits on behalf of large numbers of similarly situated claimants. The Epic Systems decision, written by Justice Neil Gorsuch, rejects a 2010 attempt by the National Labor Relations Board, the federal agency dealing with union organization and collective bargaining, to prohibit non-union employers from using so-called "class action waivers" in employment contracts. Allowing employers to bar workers from bringing lawsuits collectively could potentially reduce their options for redress when their claims are too small to justify their own lawsuits. Justice Ruth Bader Ginsburg’s dissent called on Congress to step in to protect workers’ right to collective litigation.

For all the alarm expressed by Ginsburg and other critics of the decision, some perspective is in order. Most employment claims are unlikely to be brought as class-action suits. In contrast to many consumer class-action claims, which deal with things like credit-card disclosures, people who get fired or denied agreed-upon wages will almost always show up in court or arbitration. Moreover, federal and state administrative agencies are not bound by private arbitration agreements; they are able to sue to vindicate “small claim” statutory rights where private claimants are not likely to come forward.

Perhaps paradoxically, workers as a class may gain from employers’ having a renewed incentive to put in place fair arbitration agreements. That’s because arbitration, if certain safeguards are provided, provides a cheaper, more informal mechanism for workers to assert their claims than class-action suits. Most workers don’t make enough money to hire private lawyers and proceeding on one’s own in court without legal representation is a fool’s errand. The overwhelming majority of these “pro se” claims are thrown out well before trial; few get past the motion-papers stage.

In arbitration, most claimants are likely to get a hearing— irrespective of the strength of their claim or whether or not they have a lawyer. Getting “a day in court” — in this case, a hearing on the merits — is an extremely valuable thing, especially in cases where learning why the employer acted the way it did and being able to tell your story is likely to clear emotions and promote dispute resolution.

Since the mid-1980s, when the Supreme Court first started its cascade of pro-arbitration decisions, a great deal of progress has been made to improve the fairness of the arbitration process. The Court has made clear that while arbitration involves a change of forum, it does not change workers’ substantive rights. Arbitrators must be authorized to apply the same substantive law a court would and award the same substantive remedies for proven violations. The American Bar Association, along with the American Arbitration Association (AAA), and plaintiff and defense advocacy groups, have issued a “Due Process Protocol” that sets out basic rules for employment arbitrations, including requirements that arbitrators be experienced in employment law and issue written opinions explaining their awards, and limits on what claimants have to pay in filing fees to get a hearing.

Private class action lawsuits can serve a valuable role in law enforcement, especially in consumer protection cases where individuals will not press claims. But employment law is different. By removing a source of legal uncertainty regarding class action waivers — and thus encouraging employment arbitration — the Supreme Court has helped to reinforce a surprising reality: The interests of most workers are better served through arbitration than by searching for an attorney to take their case to court.

To contact the editor responsible for this story: Romesh Ratnesar at rratnesar@bloomberg.net

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