It has become increasingly common in recent years for employers to require their employees to sign an arbitration agreement when they start working at a company. Under this agreement, employees waive their rights to sue in the event that the employer behaves improperly. Instead, employees must pursue legal action through arbitration.
Arbitration avoids a trial, and there is no jury. Instead, an arbitrator—often a retired judge or lawyer—hears limited testimony from both parties and makes a decision—which is legally binding and cannot be appealed. Many employment arbitration agreements also have nondisclosure provisions—which prevent employees from talking about any workplace dispute with others.
Up until recently, however, there has been a question of whether employees who signed arbitration agreement could still pursue class action lawsuits. In three different cases, thousands of workers banned together and filed class actions against their employers over wage and hour disputes. The plaintiffs held that such action was legal under a provision in the 1935 Labor Act—which allows activities for the purpose of collective bargaining. In 2014, the U.S. Justice Department agreed.
However, the U.S. Supreme Court issued a 5:4 decision this week that revokes the ability of employees to pursue class action lawsuits. In her oral dissent, Justice Ruth Bader Ginsburg cited the court’s decision as “egregiously wrong” and called on congress to correct the court’s action.
Other critics of the court’s decision expect that the ruling will lead to the under-enforcement of laws that were put in place to protect vulnerable workers. There is also concern that the #metoo movement and plaintiffs in other discrimination-based class actions will suffer as a result of this verdict.