The Supreme Court is poised to make forced arbitration nearly inescapable
The Supreme Court will soon decide whether employers can lawfully require workers to sign mandatory arbitration agreements that include class and collective action waivers. A ruling in NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris will have significant impacts on working people. If the Court sides with employers and the Trump administration, it is likely that the majority of workers in this country will be required, as a condition of employment, to sign away their right to pursue workplace disputes on a collective or class basis. In fact, available data suggest that it may take only six years for more than 80 percent of workplaces to adopt mandatory arbitration with class and collective action waivers.
Last year, EPI commissioned a survey that found that 53.9 percent of nonunion private-sector employers already have mandatory arbitration procedures. Prior to that study, the one major governmental effort to investigate the extent of mandatory arbitration was a 1995 GAO survey. That survey, conducted between April 1994 and April 1995, found that just 7.6 percent of employers had mandatory arbitration agreements. In other words, the use of mandatory arbitration agreements grew by more than 600 percent between 1994 and 2017. Using the growth rates between the two surveys to forecast future expansion suggests that by 2024, more than 80 percent of private sector, non-union establishments will adopt mandatory arbitration with class and collective action waiver of employment disputes, if the Court finds that such agreements are lawful.1 That will leave more than 85 million workers subject to mandatory arbitration agreements with class and collective action waivers. This means that the vast majority of workers will be forced to sign away their right to act with their colleagues to resolve workplace disputes—as well as their right to go to court for these matters. As a result, even if many workers face the same type of issue at work, each individual worker will be forced to hire their own lawyer, and resolve their dispute out of court, behind closed doors, with only their employer and a private arbitrator.
Workers depend on collective and class actions to enforce many workplace rights. Employment class actions have helped to combat race and sex discrimination and are fundamental to the enforcement of wage and hour standards. Without the ability to aggregate claims, it is very difficult, if not impossible, for workers to find legal representation in these matters. This is particularly true for low-wage workers, whose cases are unlikely to involve large enough awards to attract attorneys to invest time in the case. Class and collective action suits allow workers to pool their claims, making it possible for an attorney to earn enough to make the case worth pursuing.
But NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris have implications beyond class action suits. If the Court is persuaded by the Trump administration, the decision could prohibit a broad category of workers’ collective action guaranteed to U.S. workers since 1935 with the passage of the National Labor Relations Act. The right of working people to join together—whether through a union or not—to improve their wages and working conditions is at the heart of the NLRA. This right is as important today as it was when the Act was passed.
We are at a critical moment as a country. If we are going to address economic inequality, combat employer practices that perpetuate race and sex discrimination, and change the epidemic of sexual harassment that has been exposed by the #metoo and #timesup movements, we must be able to use our collective voice and our collective power to do so. It is only when we act together, whether as working people demanding fair pay—as the workers did in Murphy Oil—or as citizens speaking out collectively against injustice, that we are able to produce meaningful change. If the Court issues a decision that erodes our right to collective action, we must join together to demand Congress act to protect this right. After all, it was collective action that convinced Congress to pass the NLRA over eighty years ago.
1. The rate of growth of mandatory arbitration between 1994 and 2017 in percent terms was 8.9 percent per year on average, and in percentage point terms it was 2.0 percentage points per year on average. Lacking additional information to about the true growth function, we simply projected the incidence of mandatory arbitration going forward using both rates and took the average of the two. It should be noted that the 2017 survey commissioned by EPI showed that just 30.1 percent of employers who required mandatory arbitration also explicitly included class and collective action waivers in their procedures. It is likely that the lack of explicit class and collective waivers within many mandatory arbitration agreements was due to uncertainty about their legality. If the Court finds that such waivers are lawful, we expect that going forward, mandatory arbitration agreements will be highly unlikely not to include explicit class and collective action waivers.
Enjoyed this post?
Sign up for EPI's newsletter so you never miss our research and insights on ways to make the economy work better for everyone.