October 16, 2017
In recent decades, a great many employers – especially larger companies – have moved to require their employees to sign arbitration agreements as a condition of employment. The agreements are typically included in a big stack of papers employees are given – and never read – on their first day. They usually sign the agreements without thinking.
Courts have historically favored these agreements as a way to limit the cost and duration of litigation. (Arbitration is normally a more limited process than litigation.) Employers like them because they believe arbitrators are more likely to be sympathetic to them than juries are. Employee advocates don’t like them for the same reason.
Some employers have recently taken to using these agreements as a way to accomplish another goal – eliminating class action suits brought by large groups of employees. Employers strongly dislike class action suits, and some have put clauses in their arbitration agreements that say the employee will not bring or join in any class actions. The employee thus agrees that any claims he or she has against the employer will be brought individually – rather than as part of a class – and that they will be brought in arbitration rather than in court.
The question has arisen, however, as to whether such “no class action” clauses are legal and enforceable. The reason this is an issue is that federal labor law guarantees employees the right to engage in “concerted activity” with one another about the terms and conditions of their employment. A class action brought by multiple employees is by definition a form of “concerted activity.” So a clause prohibiting class action participation by employees arguably violates federal law, and should not be enforced.
Different courts and agencies have reached different conclusions about this, and the U.S. Supreme Court has now taken up three cases raising the issue. We should know in the coming months whether employers will be permitted to avoid class action suits through the use of these arbitration clauses. Advocates for both employers and employees are watching very closely.