The Federal Arbitration Act and Labor Protections

Recent Supreme Court decisions threaten workers’ rights

By Kimberly Holdiman

Law Students on Workers’ Rights Series

The Law Students on Workers’ Rights series publishes essays from current and incoming students at some of the top law schools in the country. These essays, submitted for the Charles E. Joseph Employment Law Scholarship, address the question “What are the biggest challenges facing workers’ rights in the future?”

While many aspects of the modern era and current economic realities affect employment law and workers’ rights, the Supreme Court’s repeated application of the Federal Arbitration Act (FAA) to employment and labor law affect individual workers ability to enforce their rights more than any other law.

In fact, the Supreme Court has noted that because of their presumption in favor of arbitration, arbitration today is a cornerstone remedy for civil cases. While the FAA seems to exclude employment contracts, the Supreme Court has held that this exclusion applies only to interstate transportation workers. This application has had a snowball effect in recent years, allowing employers to require employees to submit any and all labor and employment law claims to arbitration.

While the Supreme Court’s decisions are predicated on the agreement of employees to these contract clauses, few employees have the leverage to be able to negotiate or the knowledge to do so. This alone has many negative impacts on employee’s rights including: a lowered ability to utilize public opinion against employers due to the fact that arbitration proceedings are rarely published; potentially higher upfront transactional costs; and most importantly, limited access to judicial review for decisions and an inability to bring class action claims.

The FAA itself describes very limited or narrow grounds for judicial review of arbitration decisions that have little or nothing to do with an arbitrator’s misapplication of the law. While several circuits suggest other common law grounds for review, few courts have been favorable toward overturning the decisions of arbitrators.

As a result, when worker claims are sent to arbitration that is often their exclusive remedy. In a society wherein almost all judicial district provide cases at least one guaranteed review of an initial decision, this limitation inherent in arbitration cuts employees off from a meaningful root to vindicate their rights. Many arbitrators are paid by employers, or have an established relationship with the employer which while not rising to the level of “evident impartiality,” creates a gloss of unfairness from an employee’s perspective.

Coupled with an inability to have these decisions reviewed, employees can feel that arbitration is a dead-end for their rights. Further, the modern trend favoring arbitration in the employment context also limits employees’ ability to ban together to bring suit against their employer. The ability to bring a class action suit allows employees, who generally have less means than their employer to pay legal fees, to pool resources with other employees. As a result, small infringement on employee’s rights can still be vindicated by the employees.

However, the Supreme Court sees no problem where an employer requires employees to agree that all claims will be submitted to individual arbitration, rather than a class arbitration. Further, in a recent decision the court announced that where an arbitration clause is silent as to rather or not it allows class arbitration, it is interpreted to allow only individual arbitration. This decision is another in a long line of court cases chipping away at employee’s ability to vindicate their rights.

While employee rights have been greatly expanded since the Great Depression with the passage of federal laws such as Title VII, the National Labor Relations Act , the Fair Labor Standards Act, the Americans with Disabilities Act, the Family Medical Leave Act and other state laws, workers are likely to find such rights difficult to enforce where the employer requires such claims be submitted to arbitration. While arbitrators may of course uphold the employees’ rights the same as a court, they are not bound to do so the same a judicial officer is required to, nor is there the same grounds for review when they fail. Furthermore, the forum of arbitration greatly limits an employee’s ability to vindicate their rights in the first place do the potentially higher upfront costs, and inability to bring class arbitration claims.

Reflections from Charles Joseph

Kimberly Holdiman builds a solid case for the harmful effects of forced arbitration on workers’ rights, particularly the inability to bring class action suits. For many wage theft violations, including violations of the minimum wage or overtime wages, individual employees simply cannot afford the high cost of arbitration based on a relatively low amount of wages owed. The ability to join together in class action suits gives employees greater power and curbs employment violations like wage theft. Similarly, the Supreme Court opening the door to forced arbitration agreements makes it harder for workers to protect their rights against workplace discrimination and sexual harassment. In the current environment, employees may find it easier to bring cases under state and local laws.

Kimberly Holdiman is a law student at Gonzaga University School of Law. She earned the CALI Award for LRW I and ranked on the Dean’s List for 2017-2018. Holdiman will graduate with her juris doctorate in 2020.

Charles Joseph has over two decades of experience in employment law. He is the founder of Working Now and Then and the founding partner of Joseph and Kirschenbaum, a firm that has recovered over $120 million for clients.