Justices Suggest a Divide on Worker Class-Action Rights

Oct. 2, 2017, 5:59 PM

By Greg Stohr, Bloomberg News

The first Supreme Court argument of the new term suggested the justices are divided over the power of employers to block class-action lawsuits by workers and channel disputes into arbitration.

In a case that could affect the rights of as many as 25 million employees, Justice Anthony Kennedy, often the court’s swing vote, suggested Monday through his questions that he would side with employers. But the newest justice, Neil Gorsuch, said nothing during the hour-long session, leaving the outcome of the case unclear.

At issue is whether employers can enforce promises they extract from workers to pursue grievances as individual arbitration cases, rather than as group lawsuits in court.

Justice Ruth Bader Ginsburg called those agreements “yellow dog” contracts, a label that typically refers to the now-illegal practice of requiring workers to give up their right to join a union. Ginsburg said employees have little choice but to agree when an employer demands they sign an arbitration agreement.

“There is no true liberty to contract on the part of the employee,” she said.

The justices are considering three disputes involving wage- and-hour claims, and the ruling probably will apply to discrimination cases as well.

The workers say the 1935 National Labor Relations Act, which protects “concerted activities,” guarantees them the right to press claims as a group, either in arbitration or in court.

Employers and the Trump administration point to the Federal Arbitration Act, which says judges must enforce arbitration accords like any other contract. Employers say that provision applies even if it means workers must press claims individually.

Kennedy Skepticism

Kennedy, Chief Justice John Roberts and Justice Samuel Alito expressed skepticism about the workers’ arguments. Kennedy said workers could get “many of the advantages” of a group claim by working with the same attorney.

Over the past decade the Supreme Court has backed arbitration agreements between companies and consumers or other businesses.

Companies say arbitration is more efficient and less expensive than traditional litigation, reducing the pressure to settle meritless cases.

Critics say arbitration — particularly when it includes a ban on class actions — can strip litigants of important rights and make small claims all but impossible to press.

The workers’ lawyer, University of Virginia law professor Daniel Ortiz, told the justices that 25 million employees have signed arbitration accords that bar group claims.

Although the Trump administration is backing the employers, the National Labor Relations Board argued on the side of the workers in Monday’s session. The NLRB now has a Republican majority, but its Democratic-appointed general counsel, Richard Griffin, argued the case.

The court will use three cases to decide the issue. One is an appeal by the NLRB in a fight over alleged underpayments to four workers at an Alabama gas station run by a Murphy USA Inc. unit. The NLRB concluded the company engaged in an unfair labor practice by refusing to let the workers pursue their claims together. A federal appeals court threw out the board’s finding.

The court is also considering an appeal from Epic Systems Corp., a health-care software company being sued by Jacob Lewis, an employee who says the company misclassified him and other technical writers so that they wouldn’t be eligible for overtime.

The third appeal was filed by the accounting firm Ernst & Young LLP, which is fighting allegations that it also misclassified thousands of employees to make them ineligible for overtime pay.

The cases are Epic Systems v. Lewis, 16-285; Ernst & Young v. Morris, 16-300; and NLRB v. Murphy Oil, 16-307. The court will decide all three by June.

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