By Joanna Pearl, Public Rights Project Legal Director
Nearly 25 million employees lost their day in court when the U.S. Supreme Court in Epic Systems v. Lewis gutted the ability of American workers to stand up for themselves when their rights are threatened by their employers. The May decision is the latest example of the federal government abandoning workers, and cities and states must step into the void.
Threats to workers’ rights abound. Construction workers are forced to work 45 hours a week, but are paid for only 40 hours to avoid overtime. Restaurant owners withhold waitstaff’s tips. Employers fail to pay day laborers promised wages under threats of deportation. And we don’t have to look far into the #MeToo movement to find numerous disturbing examples of workplace sexual harassment. Employees have always faced challenges protecting themselves from abuses by employers who can afford better lawyers, withstand the costs of litigation, and retain control of the very terms of the employment contract.
But the 5-4 decision, which states that employers can contractually forbid workers from collectively arbitrating legal disputes, makes these challenges nearly insurmountable. In a vigorous dissent, Justice Ruth Ginsburg warned that the decision will result in underenforcement of the laws put in place to protect workers: The payoff from an individual arbitration dispute can be low, while the cost of arbitration is high. This reality, coupled with the fear of retaliation, means that employees are unlikely to proceed against employers in one-on-one arbitrations. So the decision essentially gives employers a free pass to violate minimum wage regulations, protections against workplace sexual harassment, and other labor laws.
The impact of mandatory arbitration clauses and class waivers has long presented similar challenges in the consumer context. And since the Supreme Court’s 2011 decision in AT&T Mobility v. Concepcion, companies providing consumer financial products have been able to use mandatory arbitration clauses to deny customers the right to jointly seek relief from illegal behavior. As former Consumer Financial Protection Bureau director and Ohio gubernatorial candidate Richard Cordray explained, “This practice has evolved to the point where it effectively functions as a kind of legal lockout.” By inserting class waivers in their contracts, consumer financial service companies can block class actions and insulate themselves from liability.
Scholars and advocates have highlighted the improbability of consumers pursuing individual arbitrations. Their analysis is consistent with how consumers describe their own behavior when faced with being scammed or defrauded: when the Consumer Financial Protection Bureau asked consumers in its 2015 Arbitration Study what they would do if they saw fees on their credit card bills that they knew were incorrectly assessed, the bureau learned that consumers rarely pursue formal claims, in arbitration or litigation. This means that violations of the laws that protect consumers frequently go unaddressed. The Epic Systems decision takes a practice that we know to be harmful to individual consumer rights and expands it to employment, where almost 54 percent of nonunionized companies already impose mandatory arbitration agreements.
While the judiciary limits the ability of employees to enforce their rights and the federal government sides with employers, state and local authorities are uniquely situated to protect employees from dishonest employers. Many states and localities already have employee protection statutes on the books ready to be enforced. And some jurisdictions have taken up the cause. Just last week, the Manhattan district attorney began prosecuting a construction workers’ wage theft case that alleges over $1.7 million in stolen wages. In 2016, the California Labor Commission worked with the San Diego district attorney to return$20,000 in wage loss theft from a local restaurant, leading to a criminal conviction.
In addition, many state attorneys general have units dedicated to enforcing labor laws. For example, the Massachusetts attorney general’s Fair Labor Division is responsible for enforcing the state’s wage and hour, public construction and child labor laws. Earlier this year, the division secured $95,000 in restitution and penalties from a staffing agency for an illegal scheme that cheated workers out of minimum wage, overtime and earned sick time pay.
These efforts can serve as models for employee protection, particularly when federal protectors are dormant and private plaintiffs are muzzled. More attention and resources devoted to these are needed in every state. Now more than ever, states and cities must play a role in fighting for the rights of workers and ensuring the most vulnerable populations have access to those protections.
Originally published via The National Law Journal.