Will Forced Arbitration Soon Be a Feature of Employment Contracts?

HR & Safety

In 1925, Congress passed a law called the Federal Arbitration Act.
The FAA provides for contractually based compulsory and binding arbitration, resulting in an arbitration award decided by an arbitrator or arbitration panel as opposed to a judgment entered by a court of law. In arbitration, the parties give up the right to an appeal on substantive grounds to a court.
The act was originally intended as an option for dispute resolution between businesses.
Then along came conservative Supreme Court Justice Antonin Scalia.
During his nearly 30 years on the bench, Justice Scalia encouraged the high court to interpret the FAA to include a wide array of consumer and financial-services contracts. Those decisions have limited small litigants’ right to a trial in the event of a dispute.
What does all this have to do with employment contracts?
Scalia passed away, and his replacement is another conservative jurist, Neil Gorsuch, who had this to say about the FAA during his Senate confirmation hearing:
“It used to be back at common law that arbitration was disfavored because it was thought that everyone should go to trial; trials were the norm—Seventh Amendment and all that. And then in [1925], Congress passed a law called the Federal Arbitration Act…Congress expressed a judgment that people should arbitrate their disputes. It made a judgment, policy judgment in favor of arbitration, because it’s quicker, cheaper, easier for people.”
Is Gorsuch’s understanding of history accurate? That question we will leave for legal scholars.

Potential Watershed Case

What matters is that his vote will now matter in disputes before the high court, including a case titled Epic Systems Corp. v. Lewis.
Why does that case matter?

The use of arbitration clauses in employment contracts has grown dramatically in recent years.

The issue with Epic Systems, according to legal experts, is "whether employers can, as a condition of employment, require their employees to submit all work-related disputes to arbitration—and not simply to arbitration, but to individual arbitration, with no class or collective actions allowed. Indications are that the court will say that such employment contracts are allowed."
The use of arbitration clauses in employment contracts has grown dramatically in recent years.
The Economic Policy Institute now estimates that mandatory arbitration clauses cover 60.1 million workers nationwide, and 24.7 million of them are covered by "class action waivers," which prevent participation in class-action lawsuits.
Class-action waivers are in question in the Epic Systems caseUntil 2017, the federal government had opposed class-action waiver arbitration provisions in employment contracts. That changed with the election of President Trump. His Labor Department is now siding with employers.
What might this mean for employment law?
A win for the employers will impact all workers, unionized or not. But for organized labor, the stakes are particularly high.
"A decision adverse to the employees will cripple enforcement of all federal and state minimum standards legislation that depends on private enforcement, including the Fair Labor Standards Act, Title VII (prohibiting employment discrimination), the Age Discrimination in Employment Act, and the Americans With Disabilities Act, etc.," says Craig Becker, a former member of the National Labor Relations Board and now general counsel of the AFL-CIO.
"Every well-counseled employer will require that its employees sign waiver agreements."

About the author: Miguel Escalera is a partner at the labor and employment law firm Kainen, Escalera & McHale in Hartford. 


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