Supreme Court Rules Against Workers In Arbitration Case

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Above Photo: MICHAEL WEBER/ALAMY

ON MONDAY, THE Supreme Court slowed recent momentum to give workers—including many in the tech sector—the right to a day in court.

The Supreme Court case centered around clauses in employment contracts that require employees to resolve disputes through arbitration, and preclude them from joining with others to file class-action lawsuits. In a 5-to-4 decision, the court ruled that those clauses are enforceable under federal law, which means companies can prohibit employees from banding together both privately or in court.

Such binding-arbitration clauses are widely used at technology companies, and critics say they helped allow sexual harassment to flourish by hiding complaints. More recently, some firms have taken steps to limit the practice. Uber last week said it would eliminate arbitration agreements for employees, riders, and drivers with sexual misconduct claims. (The company is still blocking riders from pursuing class action.) In December, Microsoft said it would stop enforcing arbitration agreements in sexual harassment cases. In March, however, Google filed a motion trying to compel a sexual harassment case from former engineer Loretta Lee to arbitration.

Tens of millions of employees are already subject to arbitration agreements. But Ron Chapman, a lawyer with Ogletree Deakins, says the Supreme Court ruling will encourage more employers to use them. “Whereas yesterday I would have said arbitration agreements are fairly common, in three months from now, six months from now, this will be the norm,” he says. “The entire business community was waiting on this decision.”

But Lina Khan, director of legal policy at the think tank Open Market Institutes, said the law “incentivizes companies to abuse” their power. Businesses that don’t employ such agreements “will now be at a competitive disadvantage,” Khan said.

Most employment-related class-action cases are around wages and overtime. However, these agreements came under fire recently as part of the #MeToo movement for the role that arbitration plays in silencing sexual harassment by relegating claims to private arbitrators and reinforcing a culture of secrecy that insulates predators.

The court ruled on three cases, involving an oil company, an accounting firm, and a software company. Each revolved around an employee who signed an employment contract with an arbitration agreement and later tried to file a lawsuit in federal court. The plaintiffs argued that class-action waivers violate the National Labor Relations Act, which protects workers’ right to bargain collectively. However, Justice Neil Gorsuch, writing for the majority, said the Federal Arbitration Act of 1925, which allows for compulsory and binding arbitration, supersedes the NLRA.

In her dissenting opinion, Justice Ruth Bader Ginsburg called the decision “eggregiously wrong.” She said requirements to use arbitration “does not come from Congress. It is the result of take-it-or-leave-it labor contracts harking back to the type called ‘yellow dog,’ and of the readiness of this Court to enforce those unbargained-for agreements.”

Former Uber engineer Susan Fowler, whose allegations of rampant sexual harassment at Uber helped usher in the #MeToo movement, had filed a “friend of the court” brief with the Supreme Court in support of the plaintiffs.

On Twitter, Fowler said the fight isn’t over. “The only option left is legislation. Let’s take the House and Senate back this year, and make sure we let them know we want an end to forced arbitration,” she wrote, noting arbitration is an issue beyond sexual harassment and assault and beyond even employees, “but for consumers and independent contractors, too.”