The problem with mandatory arbitration clauses

How closely did you read the packet of paperwork on your first day of work? Or the contract that came with your cellphone? Chances are good that you unknowingly signed away your access to the courts.

Arbitration clauses have become a fixture in American life. You can barely apply for a credit card, put a loved one in a nursing home or rent a car without having to agree to arbitrate all potential legal claims instead of take them to court.

The clauses are particularly common in the workplace. If an employee is cheated out of wages by being asked to work off the clock — an all too common business practice — it’s a violation of federal labor law. The worker could ostensibly sue her employer. But if she is bound by an arbitration clause, she must take her complaint before an arbitrator.

Even when a group of workers has been cheated in the same way by the same manager, if they have a signed a forced arbitration clause, they have to go the arbitration route. And in many cases they must do so individually, because almost half the companies that require arbitration also prohibit claims from being arbitrated as a group.

The lawfulness of these waivers is now being considered by the Supreme Court in three consolidated cases, Epic Systems vs. Lewis et al. The question is whether requiring individual arbitration of workplace claims violates the National Labor Relations Act.

The Supreme Court should uphold decisions by the Seventh and Ninth Circuits, as well as decades of rulings by the National Labor Relations Board, and rule that forced arbitration waivers violate our federal labor laws. The NLRA clearly grants workers the right to join together in “concerted activities,” including in collective or class legal action against their employers. And these forced arbitration waivers clearly contradict both the letter and the intent of the NLRA.

A century ago, workers had to endure low wages, long hours and unsafe working conditions. Even then, employers required employees to agree in contracts that they would not collectively protest these conditions. In 1917, the Supreme Court upheld the lawfulness of what was known as “yellow dog contracts,” or agreements in which employees promised as a condition of employment never to join a union or act collectively. The contract before the court required employees to deal with their employer “each man individually.”

Yellow dog contracts were widely used. Waitresses in New York City, for example, were required to “adjust all differences by means of individual bargaining,” and industrial workers in Moline, Ill., had to renounce collective action “with a view to securing greater compensation.”

Then, in 1932, Congress enacted the Norris-LaGuardia Act, which prohibits federal courts from enforcing such contracts. The law’s sponsor, Sen. George Norris, said yellow dog contracts deprived workers of “human liberty.”

Three years later, in 1935, the NLRA prohibited employers from requiring employees to agree to these contracts. Congress enacted the NLRA to protect the rights of employees to join together to improve their wages and working conditions, with or without a union.

Is there any difference between the yellow dog contracts of the past and today’s contracts prohibiting employees from joining together to assert their legal rights?

The employers in the Supreme Court case, supported by the Trump administration, say there is. They argue that employees are actually better off with forced arbitration. Instead of the “procedural morass” of litigating group claims in court, employees get an accessible, flexible, swift and inexpensive process, but only as individuals.

This claim is spurious. How would a non-unionized worker who is regularly cheated out of overtime find a lawyer willing to take her claim? Only if she joins together with other workers who have suffered the same. As the authors of one study pointed out, the argument is “hard to square with the reality that few employees accept the invitation.”

Few, if any, employees can pursue their claims individually. Indeed, this is exactly what these employers are betting on.

Forced arbitration is quickly becoming the norm for non-unionized workers. More and more employees are being asked to sign away their right to seek justice should they experience sexual harassment, discrimination or wage theft.

According to a recent study by the Employee Rights Advocacy Institute for Law and Policy, 80% of Fortune 100 companies have used arbitration agreements to settle workplace disputes since 2010.

Another recent paper, by the Economic Policy Institute, found that more than 60 million American workers are now bound by the agreements.

These fine-print maneuvers enable employers to act illegally. The Supreme Court shouldn’t turn the clock back on American workers.