By: Allison Castel
The National Labor Relations Act (“NLRA”) of 1935 was enacted to protect employees from the unequal bargaining power of businesses, and employers by providing safe-guards that preserve the worker’s right to negotiate and bargain, including collectively.[1] Issues tend to arise when employers ask employees to waive their right to adjudicate claims in a court of law, mandating private arbitration to handle disputes.[2] While mandatory arbitration agreements are allowed under the Federal Arbitration Act (“FAA”) of 1925, the National Labor Relations Board (“NLRB”) is tasked with enforcing the rights provided by the NLRA, and must ensure that these arbitration agreements are not a violation.[3]
Last week, the Supreme Court outlined three cases showing the conflict between the FAA and the NLRA.[4] The employers had workers sign an arbitration agreement forcing them to resolve claims individually through arbitration, and prohibiting collective action.[5] These mandatory arbitration clauses, which limit the rights of workers and consumers to when and how they can bring an action against a company, are becoming increasingly popular.[6] The large disparity in bargaining power, between an employer and employee, makes this prohibition on collective action a problem.[7] Specifically, how can employees with similar claims bring an action against their employer if they are both mandated to arbitrate individually?[8] Currently, fifty six percent of non-union private sector employees are bound to the mandatory individual arbitration clauses.[9] This decision by the Supreme Court could affect some twenty five million employment contracts in the United States.[10] While a ruling in favor of employees would greatly protect collective bargaining rights,[11] Justice Gorsuch has the deciding vote, and will likely uphold these arbitration clauses[12] in favor of employers.[13]
[1] 29 U.S.C. § 151.
[2] David Noll, With Arbitration Case, SCOTUS Can Protect Both Federal law, Workers’ rights, The Hill (Oct. 7, 2017), http://thehill.com/opinion/judiciary/354386-with-arbitration-case-scotus-can-protect-both-federal-law-workers-rights (“For many corporations, the opportunity to lower the cost of litigation while denying plaintiffs access to class action proved irresistible.”).
[3] Id.
[4] Amy Howe, Argument analysis: An epic day for employers in arbitration case?, SCOTUSblog (Oct. 2, 2017), http://www.scotusblog.com/2017/10/argument-analysis-epic-day-employers-arbitration-case/.
[5] Id.
[6] Yuki Noguchi, No Class Action: Supreme Court Weighs Whether Workers Must Face Arbitrations Alone, NPR (Oct. 6, 2017), http://www.npr.org/2017/10/06/555862822/no-class-action-supreme-court-weighs-whether-workers-must-face-arbitrations-alon (“Many employers are increasingly requiring workers to sign agreements requiring them to resolve workplace disputes about anything from harassment to discrimination to wage theft through individual arbitration. In other words, the language does not permit them to join forces with colleagues who might have similar complaints.”).
[7] Amy Howe, Argument analysis: An epic day for employers in arbitration case?, SCOTUSblog (Oct. 2, 2017), http://www.scotusblog.com/2017/10/argument-analysis-epic-day-employers-arbitration-case/ (“Justice Ruth Bader Ginsburg suggested that the ‘driving force’ of the NLRA was to correct the imbalance between employers and employees, including by protecting concerted activity.”).
[8] Id. (“[Justice Ginsburg] noted that in one of the cases before the court, the individual employee’s claim was for $1800, which would be outweighed by the costs of an individual arbitration. ‘This is truly a case,’ Ginsburg told Wall, in which there is strength in numbers – the ‘core idea’ of the NLRA.”).
[9]Nina Totenberg, A ‘Yellow Dog Contract’ And Other Jabs During Supreme Court Opening Arguments, NPR (Oct. 2, 2017), http://www.npr.org/2017/10/02/555203655/a-yellow-dog-contract-and-other-jabs-during-supreme-court-opening-arguments (“A study by the left-leaning Economic Policy Institute shows that [fifty six] percent of nonunion private-sector employees are currently subject to mandatory individual arbitration procedures under the 1925 Federal Arbitration Act, which allows employers to bar collective legal actions by employees.”.)
[10] Robert Barnes, Supreme Court begins new term with case on whether workers can be forced into individual arbitration, The Wash. Post (Oct. 2, 2017), https://www.washingtonpost.com/politics/courts_law/supreme-court-begins-new-term-with-case-on-workers-right-to-individual-arbitration/2017/10/02/3a4db3da-a79f-11e7-92d1-58c702d2d975_story.html?utm_term=.fdc74f268a4e (“A lawyer for the workers told the court that an estimated [twenty five] million employees have signed contracts that the companies say rule out collective action on workplace issues and are authorized under the Federal Arbitration Act. That would, for example, keep those workers from pursuing class-action lawsuits in federal court.”).
[11] Id. (“‘To proceed alone in the arbitral forum will cost much more than any potential recovery for one,’ Ginsburg said. ‘That’s why this is truly a situation where there is strength in numbers, and that was the core idea of the NLRA. . . . We have to protect the individual worker from being in a situation where he can’t protect his rights.’”).
[12] Robert Barnes, Supreme Court begins new term with case on whether workers can be forced into individual arbitration, The Wash. post (Oct. 2, 2017), https://www.washingtonpost.com/politics/courts_law/supreme-court-begins-new-term-with-case-on-workers-right-to-individual-arbitration/2017/10/02/3a4db3da-a79f-11e7-92d1-58c702d2d975_story.html?utm_term=.fdc74f268a4e (“The advocacy in the case was changed by the political turnover in Washington. The National Labor Relations Board, an independent government agency, agreed with the workers. So did the Justice Department — until the election. Then the Trump administration filed a brief siding with the companies.”).
[13] Amy Howe, Argument analysis: An epic day for employers in arbitration case?, SCOTUSblog (Oct. 2, 2017), http://www.scotusblog.com/2017/10/argument-analysis-epic-day-employers-arbitration-case/ (“[W]hile on the court of appeals Gorsuch generally interpreted arbitration clauses ‘in light of the overriding presumption in favor of arbitration.’”).
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