27. May 2018 · Comments Off on Mandatory Arbitration and the Supreme Court Decision · Categories: Politics, Social/Culture · Tags: , ,


Some of you may have heard slight mutterings in the media regarding the recent Supreme Court decision that allows private companies to force their workers to sign mandatory arbitration agreements. It sounds pretty boring. Let me rephrase: The Supreme Court just gave private companies the power to treat their workers anyway way they want without any regard for federal, state or local laws.

The court decision was applied to three separate cases, all of which involved similar arguments where an employer violated state or federal labor laws. At least two of the cases involved an employers refusal to pay overtime as required by state laws. You would think this would be any easy one… If the law says they have to pay, they have to pay, right?

However, in all three cases, the employers simply refused to comply with these laws. OK, so this is where the employee takes the dispute to court, right?

Well in all three cases, the workers had signed arbitration agreements which according to the Federal Arbitration Act of 1925 means that the employees have to duke it out with their employers in private arbitration. That basically means the employee and the employer sit down to work out a “deal”. Of course the employer always has the leverage, like… “do you want to keep your job?”. Without the protection of the law, they really don’t have any other leverage.

In 1935 this had become such a pressing problem that Congress enacted the National Labor Relations Act, which provided the worker with the right to collectively arbitrate. In other words, in answer to that question about keeping a job the worker can now say, “do you want to keep producing?” Collective arbitration is what made the U.S. such a great place to work. You didn’t even need government regulation because entire crews can bargain with their employers on an equal footing.

But in recent years, some companies have started adding a clause to their arbitration agreements saying that workers can only arbitrate as individuals, not collectively. But isn’t that a violation of the National Labor Relations Act? Why, yes it is but underpaying workers is also a violation of law so why would this be any different? The challenge is finding a way to enforce the laws and to do that you have to take it to court, but wait… they CAN’T take it to court because of the arbitration agreement.

So in 2018, the four liberal members of the Supreme Court, while judging appeals, tried to make the case that the provision in the National Labor Relations Act to allow collective arbitration supersedes FAA’s command to enforce arbitration agreements. This was essentially the only path back to any kind of leverage a worker might have.

But the majority opinion, led by Neil Gorsuch, stated that the NLRA only provided the right to collectively bargain, not to supersede the FAA. The contention is that this interpretation is too literal, which does make sense… Think about it, Congress in 1935 obviously didn’t take in to consideration the possibility that a company would simply write a clause in their arbitration agreements that puts them beyond the reach of very law they were enacting.

Nevertheless, all three cases were decided on a soft argument that because 77 years passed from the enactment of the NLRA to the first case where it was used to challenge the FAA, the legitimacy of the challenge is “doubtful”. The conservatives took the “when in doubt go with what is clear” option, saying that the FAA clearly forces arbitration, with no option to appeal. Then they took a quick lean on the “don’t legislate from the bench” argument, even admitting that while the decision may not result in the best policy, a different decision would require a different law.

So from a technical stand point, I can understand the decision but from a moral stand point it’s pretty disappointing, especially given how “arguable” the decision is and how significant the impact will be.

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