Supreme Court

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Businesses Can Force Employees To Use Individual Arbitration To Settle Disputes, U.S. Supreme Court Rules

May 21, 2018 - 5:23 pm

WASHINGTON (WCBS 880/CBS News/AP) -- The U.S. Supreme Court ruled 5-4 Monday that businesses can force employees to use arbitration individually, rather than banding together to use the courts or class-action lawsuits, to resolve disputes about their pay and conditions in the workplace.

The ruling is an important victory for business interests.

The outcome does not affect people represented by labor unions, but an estimated 25 million employees work under contracts that prohibit collective action by employees who want to raise claims about some aspect of their employment.

The result could prompt a new round of lawsuits aimed at limiting class or collective action to raise allegations of racial discrimination.

CBS News Analyst Rikki Klieman said the decision will have a lasting impact, particularly given the present state of affairs with an increased attention toward workplace sexual harassment and misconduct.

Klieman noted the Stormy Daniels case, in which Daniels is suing President Donald Trump and his personal attorney, Michael Cohen, to invalidate a confidentiality agreement she signed about an alleged affair with Trump days before the 2016 election.

Klieman also noted a recent policy change by Uber in how it handles sexual assault and harassment cases. Uber announced just this past Tuesday that it was ending the practice of mandatory arbitration in such cases.

The ride-hailing giant had forced accusers to mediate their claims in secret. Now those who agree to settlements will not be required to sign confidentiality agreements. 

Tony West, Uber's chief legal officer and former associate attorney general during the Obama administration, said the decision for survivors to tell their stories, if they choose, "ought to reside with the survivor." 

Klieman said the cases suggested to her that the tide was turning against arbitration clauses, but now the Supreme Court has decided otherwise.

The Trump administration backed the businesses, reversing the position the Obama administration took in favor of employees.

Justice Neil Gorsuch, writing for the majority, said the contracts are valid under the arbitration law. "As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear," Gorsuch wrote.

The court's task was to reconcile federal laws that seemed to point in different directions. On the one hand, New Deal labor laws explicitly gave workers the right to band together. On the other, the older Federal Arbitration Act encourages the use of arbitration, instead of the courts.

“This decision by the United States Supreme Court today shows that with a conservative majority – and the opinion is written by the newest justice, Neil Gorsuch – that you are definitely going to keep values in favor of the employer and not in favor of the workers,” Klieman said. “In the minority, the justices were really unhappy. Justice Ruth Bader Ginsburg went so far as to read her dissent from the bench. That is very rare, and it shows true disagreement with the majority.”

In her dissent, Justice Ginsburg called the decision "egregiously wrong" and likely to lead to "huge underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers." Ginsburg said that the individual complaints can be very small in dollar terms, "scarcely of a size warranting the expense of seeking redress alone." Ginsburg read a summary of her dissent aloud.

Klieman expressed concern herself as to how the decision would affect cases involving sexual harassment or discrimination.

“I do think that the time has come for transparency; that what we have seen particularly in the sexual harassment arena is that if an employer protects someone who is sexually harassing people by having secret arbitration, you are continuing to abet the sexual harasser, or the sexual assaulter, or the person who’s engaged in racial discrimination. You are allowing that activity to continue if the proceedings are secret and if you don’t get rid of that person,” she said.

The National Labor Relations Board, breaking with the administration, argued that contracts requiring employees to waive their right to collective action conflict with the labor laws. Business interests were united in favor of the contracts.

Lower courts had split over the issue. The high court considered three cases - two in which appeals courts ruled that such agreements can't be enforced and a third in which the appeals court said they are valid.

(© 2018 WCBS 880. CBS News and The Associated Press contributed to this report.)