Tag Archive for: #employmentlaw

With conservative justices in the majority, the court handed employers a victory earlier this year with a 5-4 decision affirming employers’ right to require workers to resolve complaints through arbitration and to bar workers from banding together in class actions challenging pay practices, discrimination and other alleged labor violations.

But the area of arbitration in the workplace remains fraught with uncertainty, as the new cases show, and the court is seeking to clear up some of the ambiguity. Two of the cases are scheduled to be argued before the court on Monday.

“These are issues that remain of importance to the big business community,” said Kalpana Kotagal, a plaintiff-side lawyer with Cohen Milstein Sellers & Toll PLLC, a law firm that has represented workers in high-profile class action cases.

Advocates for sexual-harassment victims say that arbitration—which is generally a confidential proceeding, with little or no public paper trail—allows harassers and their employers to avoid public accountability and keep claims and settlements secret. Disputes are heard by arbitrators, often retired lawyers or judges, who are appointed by both sides in the conflict.

Employers often prefer arbitration, saying it is a faster and less expensive process than litigation. Worker advocates say that the process makes it harder to address systemic abuses such as pay discrimination because allegations can’t be consolidated into a single class-action lawsuit. Studies by Cornell University professor Alexander Colvin have found that arbitrations favor employers more often than litigation does, and result in lower awards for employees.

In arbitration, “employers get better results and lower chances of really large damage awards” to plaintiffs, said Mr. Colvin, now interim dean at Cornell’s ILR School. “One of the biggest motivating factors for employers is avoiding big jury awards.”

The U.S. Chamber of Commerce has weighed in, filing briefs in support of businesses hoping to move more of their disputes into arbitration. In general, the court under Chief Justice John Roberts has been friendly to this position.

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Workers may yet find allies in state courts. This month, the highest court in Kentucky made it illegal for employers to require workers to sign mandatory arbitration clauses as a condition of employment. The decision could be overturned if it is challenged and lands in front of the U.S. Supreme Court, legal experts say.

The three cases before the court hinge on largely technical questions, such as whether a carve-out in the 1925 Federal Arbitration Act—to exempt transportation workers from mandatory arbitration agreements—applies equally to employees and independent contractors, and whether arbitrators or courts should make final decisions about whether a dispute should go into arbitration.

In the transportation case, which was argued before the court earlier this month before Justice Brett Kavanaugh was confirmed, a truck driver named Dominic Oliveira filed a class-action lawsuit against New Prime Inc., the company he worked for as an independent contractor, for unpaid wages. New Prime argued that Mr. Oliveira was required to arbitrate his dispute. Mr. Oliveira said he was exempt from arbitration because of the transportation-worker carve-out.

New Prime asked the Supreme Court to decide whether the exemption applies to independent contractors, and whether such threshold issues—determining whether an arbitration clause is enforceable—should be decided by a court or an arbitrator. As with the content of lawsuits themselves, parties who want to have their cases heard in court prefer these preliminary decisions be made in court.

“These questions have a really big impact on employers because an arbitrator is more likely to determine that a case needs to be arbitrated,” said Katherine Sandberg, a management-side employment lawyer at Fisher & Phillips LLP.

Based on the oral arguments, observers expect the court to rule for the driver in this case, saying that a close reading of the FAA’s exemption for transportation workers includes independent contractors.

In one of the other cases, Lamps Plus Inc. v. Varela, the court will examine whether class-wide arbitrations are prohibited, even if an arbitration clause didn’t specifically bar class actions. If decided in favor of Lamps Plus, the case could lead to new curbs on class actions.

The final case, Henry Schein Inc. v. Archer and White Sales Inc., doesn’t concern an employment relationship; instead, it involves a dispute between manufacturers and a distributor. Like the New Prime case, though, it delves into the question of whether a court or an arbitrator determines preliminary questions, such as whether an arbitration clause should be enforced at all.

Legal experts say they expect to see the Supreme Court take up additional arbitration cases in the future. “The role arbitration plays in our legal system and our economy has grown so much that there will be a series of issues for the court to look at even after this year,” said Paul Bland, executive director of Public Justice, the watchdog organization that represents Mr. Oliveira in the New Prime case.

Write to Lauren Weber at lauren.weber@wsj.com