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By Ben Penn
The U.S. Supreme Court’s decision to legalize class action waivers in mandatory arbitration agreements suddenly hits play on numerous paused lawsuits by workers against their bosses.
Attorneys estimate that anywhere from hundreds to thousands of federal and state lawsuits or arbitration claims were on hold, awaiting the May 21 landmark ruling. In many of those cases—including wage-hour complaints against tech giants Uber, Grubhub, and Amazon—judges agreed to halt the lawsuits, pending the outcome that the justices have now provided.
Now lawyers for plaintiffs and management can dust off the litigation and grievances. They may also begin resolving the claims by arbitrating them one worker at a time.
In a 5-4 vote, the Supreme Court said companies can require their workers to go through individual arbitration to pursue any legal claims against their employers, rather than go to court or join together in class lawsuits or grievances. The decision has particular ramifications in the wage-and-hour realm, where for the past few decades, employees have increasingly united with current or former coworkers to allege companies should be on the hook for failing to pay the minimum wage or time-and-a-half overtime.
“For employers with pending class and collective actions in federal court and that have rolled out arbitration plans containing waivers, this ruling signifies the moment when it becomes critical to re-examine defense strategies,” Brett Bartlett, who co-chairs the national wage-hour practice group at management firm Seyfarth Shaw, told Bloomberg Law.
Long-term, the consequences of the court’s decision will be gradually determined as businesses that don’t include class action waivers in their employment contracts decide whether to use the new legal clarity on the issue as a motive to start requiring their employees to sign waivers as a job condition. In the short term, the impact will come from the revived grievances and existing private court cases, many of which lawyers predict will now shift to arbitration.
“I’m sure there are thousands of them out there,” Michael Rubin, a partner at plaintiffs’ firm Altshuler Berzon in San Francisco, told Bloomberg Law, referring to the number of ongoing worker claims affected by the high court ruling.
Businesses that have been attempting to squash lawsuits by arguing that their arbitration agreements should be enforced now have some options. Their legal choices may vary based on interaction of state laws, the size of the class, and other factors, but the Supreme Court’s May 21 ruling will certainly spring management-side attorneys into action.
Where courts have ruled that a waiver is not enforceable, “motions for reconsideration should be among the important options considered,” Bartlett told Bloomberg Law.
Although conventional wisdom dictates that lower court judges will defer to the Supreme Court’s new precedent and allow employers to enforce their arbitration clauses, Rubin predicts some of the frozen class actions will remain in the courts.
“Some will be sent to individual arbitration, but many employers will probably choose to stay the course if the litigation is far enough along, rather than incurring the costs of individual arbitrations,” Rubin said. He represented a coalition of unions and nonprofits in a friend-of-the court brief last year that urged the justices to side against businesses.
Depending on the jurisdiction a case is in, business must cover the arbitration costs, a factor that could persuade some companies to continue defending themselves in class litigation.
Still, an attorney representing Murphy Oil, one of the three victorious industry parties in yesterday’s ruling, said that for his firm, the path forward will be simple.
“I would certainly anticipate that we would seek to compel arbitration and deal with whatever comes next,” Jake Schwartz, a principal at Jackson Lewis’ Atlanta office, told Bloomberg Law.
Four Murphy Oil workers alleging that the company violated wage and hour law saw their court case tossed in 2010. The court said the lawsuit was barred by a class action waiver the workers signed when they started with the company.
One of those workers then filed a complaint with the National Labor Relations Board, which agreed with the worker that the waivers violated his right to engage in concerted activity with coworkers under federal labor law. The Supreme Court disagreed.
Schwartz will hardly be the only lawyer telling employers that arbitration is the smarter play.
“It’s hard for me to imagine a case in which it will be more expensive to arbitrate with purported class representatives on an individualized basis than it would be to continue litigating in federal court on a class basis,” Gregory Jacob, a partner at O’Melveny & Myers in Washington, told Bloomberg Law.
The other two companies involved in the May 21 Supreme Court ruling were health-care software company, Epic Systems Corp., and accounting firm Ernst & Young LLP.
Justice Ruth Bader Ginsburg dissented in the 5-4 ruling, writing for the court’s minority. She highlighted her concern that as a result of the majority opinion, workers that had joined a class action may fear retaliation and won’t seek redress through the arbitration process.
Ginsburg’s words resonated with Justin Swartz, who co-chairs the class action practice group at plaintiffs’ firm Outten & Golden. He will now be advising workers in cases that were stayed until the Supreme Court weighed in May 21.
“Our advice is they will not be able to proceed as a class action and that the best way to vindicate their rights is to file an individual arbitration, if they are not worried about retaliation and they can afford to do it alone,” Swartz told Bloomberg Law.
“But, as justice Ginsberg noted, most individuals will not be able to vindicate their rights and recover lost wages because most individuals do not have the means to litigate against their employers by themselves,” Swartz said. “And most wage-and-hour claims are not big enough to justify individual arbitration.”
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