Divided Supreme Court Sides With Businesses Over Workers

May 22, 2018

A divided Supreme Court ruled Monday that businesses can prohibit their workers from banding together in disputes over pay and conditions in the workplace, a decision that affects an estimated 25 million non-unionized employees nationwide.

Conservative-leaning justices held that individual employees can be forced to use arbitration, not the courts, to air complaints about wages and overtime. The four dissenting liberal-leaning justices called the decision "egregiously wrong," and said the decision will hit low-wage, vulnerable workers especially hard. 

The ruling came as a result of three cases brought against Ernst & Young LLP, Epic Systems Corp. and Murphy Oil USA Inc. Each required its workers, as a condition of accepting employment, to waive their rights to ever collectively file suit.

Jim Prozzi is a partner at the Pittsburgh office of law firm Jackson Lewis LLP, which served as counsel to Murphy Oil. He said he’s not surprised by the justices’ ruling, especially after Justices Clarence Thomas and Neil Gorsuch, who wrote for the majority, both declined to ask any questions during oral arguments last fall.

"It's a significant victory for employers," Prozzi said. "Essentially the choice for an employee is, 'Yes, I can sign this and I know what I'm going to sign, or I don't take employment.' I think that's a reasonable choice. It's like any other condition of employment."

While the complaints in Monday's decision involved pay issues, the outcome also might extend to workplace discrimination and other disputes if employee contracts specify that they must be dealt with in one-on-one arbitration.

Workers who want to take action against sexual harassment, pay discrimination, pregnancy discrimination and racial discrimination "may now be forced behind closed doors into an individual, costly - and often secret - arbitration process," said Fatima Goss Graves, president and CEO of the National Women's Law Center.

Lawyers representing management said the decision protects businesses from endless, costly litigation. Critics of the ruling argue that forcing employees to arbitrate individually puts the financial onus on the aggrieved worker, and that any amount they might obtain through a lawsuit would be dwarfed by legal fees. 

Claudia Davidson, a union-side labor attorney in Pittsburgh, said the conservative-led decision is "wrongheaded" and reflects a years-long pattern at the Supreme Court of limiting class actions and favoring employers.

The court's task was to reconcile federal laws that seemed to point in different directions. The National Labor Relations Act of 1935 explicitly gives workers the right to band together; the Federal Arbitration Act passed a decade earlier encourages the use of arbitration, instead of the courts. 

"The court has decided to prefer one of the other... to the detriment of employees, even where they've been given Congressional protections," Davidson said.

Gorsuch wrote the contracts are valid under the arbitration law: "As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear." Ginsburg, who read a summary of her dissent aloud to stress her disagreement, said employees don't really have a choice about whether to sign such agreements, labeling them "arm-twisted, take-it-or-leave-it contracts." 

"Congressional action is urgently in order," Ginsburg said.

Kristen Clarke, president of the Lawyers' Committee for Civil Rights Under Law, said she fears the decision will have far-reaching effects.

"Today's decision will make it easier for employers to escape liability for widespread discrimination and harassment. No American should be forced to sign away their right to invoke the meaningful protections afforded by our nation's critical civil rights laws," Clarke said.

The National Labor Relations Board, breaking with the administration, argued that contracts requiring employees to waive their right to collective action violate labor laws.

Business interests were united in favor of the contracts. Gregory Jacob, a former high-ranking Labor Department official in the Bush administration, said the court got it right Monday. The Trump administration backed the businesses, reversing the position the Obama administration took in favor of employees.

"This decision thus will not see a huge increase in the use of such provisions, but it does protect employers' settled expectations and avoids placing our nation's job providers under the threat of additional burdensome litigation drain," Jacob said.

The outcome does not affect the nation's 14.8 million people represented by labor unions, including about 665,000 Pennsylvanians.

The Associated Press contributed to this report.