Press Releases | Forced arbitration

News from EPI More than half of American workers are prohibited from suing their employer

A new EPI paper by Cornell professor Alexander J.S. Colvin shows that more than half of private sector nonunion workers—or 60 million people—are subject to mandatory arbitration in employment contracts, which takes away their access to the court system that protects their legal employment rights.

Mandatory arbitration agreements are used by employers to require employees, as a condition of employment, to agree to arbitrate legal disputes rather than being able to go to court. These agreements bar access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act. In other words, when a worker is paid less than she is owed, is fired for being pregnant, or is underpaid because of her race, she cannot have her claim heard in a court of law—instead, she is locked into a process that favors the employer.

This new data collected by Colvin in 2017, show that the number of companies requiring mandatory arbitration has increased from around 2 percent of workers in 1992 to more than half of workers in 2017.

“Although seemingly voluntary, an individual has to sign this agreement if they want to get the job,“ said Colvin. “Working people have seen an increased attack on their rights and wages over the last few decades. Now, more than ever, it is important for them to have access to the court system as a safety net for worker protections.”

Mandatory arbitration also has a tendency to suppress claims. Colvin estimates that an average of only 1,880 mandatory employment arbitration cases are filed per year nationally. Given the finding that 60 million American workers are now covered by these procedures, this means that only 1 in 32,000 employees covered by these procedures actually files a claim under them each year. Moreover, these claims are less likely to succeed than lawsuits, and when workers do prevail in arbitration, they are awarded far less in damages.

Additionally, Colvin found that 41 percent of employees subject to mandatory arbitration also have waived their right to be part of a class-action or collective action. This is particularly relevant because next week, the Supreme Court is scheduled to hear argument in National Labor Relations Board v. Murphy Oil USA, Inc. (Ernst & Young LLP v. Morris and Epic Systems v. Lewis) challenging mandatory arbitration agreements with class and collective action waivers as a violation of the National Labor Relations Act.

“The Trump administration and corporate interests are fighting to take away workers’ right to join together to pursue work-related claims. The National Labor Relations Act guarantees workers this basic right,” said McNicholas. “Working people depend on class-action lawsuits to enforce many workplace rights. If the court sides against working people, this may be one of the last workers’ rights cases the Supreme Court has the opportunity to consider in the foreseeable future.”

The increasing use of mandatory arbitration by employers is part of a trend that has left workers with increasingly less power in the workplace. Access to statutory remedies is an important part of EPI’s agenda to raise wages for American workers.

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