What You Need to Know
- Arbitration is widely perceived as less favorable for employees pursuing claims than the courts.
- A U.S. Supreme Court case will define how broadly to apply a federal law exempting certain transportation workers from arbitration.
- The case is before the court at a time that arbitration generally is under fire.
By deciding whether a worker who loads and unloads cargo for Southwest Airlines has to arbitrate her employment claims, an upcoming U.S. Supreme Court ruling could settle a question that’s been litigated with growing frequency over the last three years: Who, exactly, counts as a worker engaged in foreign or interstate commerce?
The answer could have costly implications for employers across the country, since under federal law arbitration agreements cannot be enforced for precisely that type of worker. Depending on how broadly it chooses to define “interstate transportation worker,” the Supreme Court could pave a clearer path to litigation for workers far beyond the plaintiff in the case—including ride-share and delivery drivers.
As Congress considers a bill that would ban mandatory arbitration agreements for employment, consumer, antitrust and civil rights disputes, and federal agencies mull new restrictions on mandatory arbitration agreements, a broader definition of this type of worker would be yet another blow for employers looking to use those agreements to avoid costly litigation. But for worker advocates, ensuring a broader swath of workers will be able to pursue their claims in a public—and arguably more fair—forum is another step in the right direction.
More than half of all U.S. non-unionized, private-sector workers were subject to mandatory arbitration procedures in 2017, according to a report by the Economic Policy Institute. This used to be far less common. In 1992, just over 2% of those workers were subject to these agreements...
...Congress is reviewing the FAIR Act, which extends the ban to mandatory arbitration agreements for employment, consumer, antitrust and civil rights disputes. In January, the National Labor Relations Board said it is considering a new legal standard for whether confidentiality requirements in mandatory arbitration agreements violate federal labor law.
While workers have become increasingly aware of mandatory arbitration agreements, partly due to a high-profile effort to ban them in the sexual assault and harassment context, some employers have been reconsidering their stance on those agreements, too, said Kevin Terry, who represents employers at Michael Best & Friedrich.
“I think that companies have been wrestling with the benefits of mandatory arbitration clauses in employment agreements for a while and especially more recently,” Terry said.
“The goal… for many years was to increase efficiency of disputes and to minimize cost of disputes,” he added. “But with the number of federal agencies kind of calling into question that philosophical approach, and a growing sentiment nationwide to allow employees to take claims to court and to have transparent disputes with their employers, and a willingness from some employers to not be viewed as anything less than transparent in their dealings—I think transportation workers are just adding to the number of employees with whom employers are becoming less and less critical with respect to evaluation of whether binding arbitration agreements in employment are a good thing for their company.”
That said, Terry noted that judicial systems are facing the same staffing issues that are “everywhere in the country right now. They need more people. And generally speaking, litigation in the court systems takes so long decisions will take longer to reach, employers will be spending more manpower and time going through federal and state court litigation.”
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