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Supreme Court approves individual arbitration clauses for workers

Some 56 percent of non-union, private sector workers in the U.S. are subject to an individual arbitration clause in their employment contract. In other words, they cannot band together in a class action but must bring any employment-related claim in individual arbitration. Perhaps tens of millions of people are therefore barred from what is often the most effective method of challenging illegality in their workplaces.

The number of affected workers is about to skyrocket. In a 5-4 vote, the U.S. Supreme Court has just ruled that individual arbitration agreements are legal and enforceable.

The case before the court involved three wage-and-hour cases which had been consolidated because they involved the same basic issue. Wage-and-hour cases typically involve issues such as unpaid overtime or worker misclassification.

In each case, the workers brought suit against their employers despite having signed an individual arbitration agreement as a condition of their employment. Each preferred not to go to arbitration.

In one case, for example, the lead plaintiff had a case in arbitration in which he sought $1,800 in unpaid overtime. The legal fees for that arbitration were apparently $200,000. While that fee may not be representative, it's not surprising that the costs of arbitration could outweigh the potential recovery. One of the benefits of class action litigation is that the fees and costs are incurred by the class as a whole.

The workers argued that the National Labor Relations Act guarantees employees the right to collective action. The employers countered that the Federal Arbitration Act entitles them to require individual arbitration as part of an employment contract.

Crucially, the NLRA was passed 10 years after the Federal Arbitration Act. If the court had found the two laws were in conflict, it might have determined that the newer law superseded the older one. The majority, however, found no such conflict.

"The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written," opined Justice Neil Gorsuch for the majority. He went on to say there was no evidence Congress intended the NLRA to supersede the Federal Arbitration Act and, "because we can easily read Congress's statutes to work in harmony, that is where our duty lies."

Justice Ruth Bader Ginsburg wrote for the dissenters, decrying the majority ruling as "egregiously wrong." She predicted the outcome will be a vast underenforcement of state and federal employment laws of all types as workers' cases are taken out of the courts and resolved in private arbitration.

If you have an employment law claim, don't give up. Whether in arbitration or in court, an employment law attorney can fight for your rights.

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