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Mandatory arbitration agreements prevent 60M U.S. workers from resolving employment disputes in court

By Pamela Wolf, J.D.

A study released by the Economic Policy Institute finds that through the use of mandatory arbitration agreements in employment contracts, some 60 million U.S. workers—half of private-sector nonunion workers—no longer have access to courts to resolve employment disputes. That doesn’t mean, however, that the number of workers arbitrating workplace disputes has increased correspondingly, because mandatory arbitration tends to suppress claims, according the author of the report, Cornell Professor Alexander J.S. Colvin.

Class arbitration waivers. The report comes in advance of the Supreme Court’s scheduled oral argument on October 2 in a triad of consolidated cases that challenge the inclusion of class action waivers in arbitration agreements. In NLRB v. Murphy Oil USA, Inc. (No. 16-307), along with two other cases, Epic Systems Corporation v. Lewis (No. 16-285) and Ernst and Young LLP v. Morris (No. 16-300), the Justices will resolve the question of whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violate the National Labor Relations Act; the Board contends they do. The three cases explore the territory where the NLRA and the Federal Arbitration Act, which favors enforcement of arbitration agreements, meet.

The cases are further complicated by the fact that the Justice Department under the Trump administration has flipped-flopped, withdrawing the representation and support it gave the Labor Board under the Obama administration in the Murphy Oil case at the petition for certiorari stage. After the High Court granted certiorari on January 13, 2017, the DOJ reversed course, left the Board to represent itself, and filed an amicus brief arguing against the Board in the Murphy Oil case, and in support of the employers in Ernst & Young and Epic Systems. As Colvin notes in his report, the outcome of the consolidated cases could have “wide-reaching implications for workers’ rights going forward.”

Growing practice. Since the early 2000s, the share of workers subject to mandatory arbitration has more than doubled and now exceeds 55 percent, Colvin’s study finds. “This trend has weakened the position of workers whose rights are violated, barring access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act,” the report states.

Key findings of the study:

  • More than half—53.9 percent—of nonunion private-sector employers have mandatory arbitration procedures. Among companies with 1,000 or more employees, 65.1 percent have mandatory arbitration procedures.
  • Among private-sector nonunion employees, 56.2 percent are subject to mandatory employment arbitration procedures. Extrapolating to the overall workforce, this means that 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration.
  • Of the employers who require mandatory arbitration, 30.1 percent also include class action waivers in their procedures—meaning that in addition to losing their right to file a lawsuit on their own behalf, employees also lose the right to address widespread employment rights violations through collective legal action.
  • Large employers are more likely than small employers to include class action waivers, so the share of employees affected is significantly higher than the share of employers engaging in this practice: Of employees subject to mandatory arbitration, 41.1 percent have also waived their right to be part of a class action claim. Overall, this means that 23.1 percent of private-sector nonunion employees, or approximately 24.7 million American workers, no longer have the right to bring a class action claim if their employment rights have been violated.