Supreme Hears Key Case on Mandatory Arbitration

Yesterday, the Supreme Court heard oral arguments in an important workplace case.

No one likes to be sued, including employers. More than 50% of all employees sign arbitration agreements. This means that they cannot sue their employer. Instead, they go to arbitration. This shifts costs to employees—often they pay for expenses they wouldn't see in court.

More important, it keeps workplace disputes private. Back to that point in a quick minute.

In prior cases, the Supreme Court ruled that employers could force employees into arbitration.

At issue is a clause in the Federal Arbitration Act, a matter on which I have published extensively.

The Act was passed as a business-to-business law. 

Consider a potato farm in Idaho shipping product to a grocer in New Jersey. Neither one wants a legal problem. Suppose the farm ships good potatoes but they arrive rotten in New Jersey. Neither wants to travel cross-country for a lawsuit. They can agree to take their dispute to arbitration—and fashion a system that is based on industry not legal norms.

The Supreme Court has misread the law as applying to most employment relationships, too.

Not so.

Section 1 of the Act exempts "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

That’s weird until you read the full congressional record. Unions representing merchant marine sailors and railroad workers showed up in 1924 to testify. They said, “Keep us out of arbitration—we want access to courts.” Congress said, “Fine. This is about businesses, anyway.”

The Supreme Court has ignored that history. 

The conservative majority takes a textualist approach—so, all employees except those in the red text above are not exempt, meaning that everyone except transportation workers can be required to arbitrate claims. 
The Court ignores the fact that nearly all the testimony was about business-to-business disputes and the high costs of litigating commercial disputes.

Now comes a truck driver who says he wasn’t paid a minimum wage. He has a lawsuit pending. 

The trucking company says, “Too bad. You signed an arbitration agreement.”

The truck driver is saying that he has a contract of employment in the transportation industry, therefore, he is exempt from arbitration (see red text above).

The company says, “This is not a 'contract of employment'.”

True—but only because the employer changed an employment relationship into an independent contractor relationship.

More broadly, this case is about a trend that has played out since the 1980s. Republican justices want to shield employers from liability in court. They want these disputes to be private, not public.

Closing thought: Why are wages stagnant when the economy is so strong? Many reasons. One is that when 50%+ of the workforce cannot sue to protect their rights, bad actors can get away with wage cheating… and discriminatory pay practices… and colluding with each other not to poach workers. Seriously, working people have been systematically cut out from the courts. That is not what Congress meant, ever.