In an important 5-4 decision, the U.S. Supreme Court this morning held, for the first time, that class or collective action waivers, particularly in wage/hour cases, and contained in arbitration agreements between employers and employees are valid and enforceable.

Because wage and hour class and collective actions are quite costly for employers to defend

It’s hard to read the Connecticut Law Tribune’s Editorial this week on “The Problem of Workplace Arbitration Clauses” with a straight face. It is dripping with sarcasm, filled with sweeping generalities, and reserves its greatest enmity for employers and the lawyers that represent them.

If the editorial is to be believed, employers and their lawyers apparently routinely use “deceptive” arbitration clauses — often pushed by a “third assistant personnel clerk” — that are hidden until “defense counsel raises the jury waiver or arbitration agreement from its dusty grave in the company’s personnel files.”

But perhaps I’m overreacting. So let’s review the editorial more closely and try to separate fact from fiction.  The editorial, in its full unedited version, is in italics. 

Over the last decade, employers have more and more often incorporated jury waiver or mandatory arbitration clauses into their employment arrangements to avoid the perceived horror of facing jury review of the way they treat their employees. These clauses are often presented in circumstances that many argue are deceptive, if not downright coercive.

On the first premise — that employers are using arbitration agreements more — the editorial doesn’t provide numbers. But I’ll tend to agree with the notion that the use of arbitration agreements are increasing. However, most employers are not concerned with “jury review.”  Just a handful of cases ever see a court room. Only 2.9 percent of federal employment cases even reach trial! The reasons for their use are complicated but part of it is that the cost of defending cases has skyrocketed. Indeed, from 2010 to 2013, the median time from filing to trial of a civil case in federal court in Connecticut has risen from 27.9 months to 35.7 months (nearly three years!).  Arbitration is much quicker and more cost effective for both sides.

As to the second premise — that the clauses are presented in circumstances that are “coercive” — I suppose that is up for debate. But it depends on your definition of “coercion”.  The legal definition of coercion typically means through “force” or “duress”.  The classic law school example of being forced to sign a contract at gunpoint is clearly “coercion.”  But an employee who wants a job and signs an agreement if he wants the job? In my view (and many courts), that is not “coercion.”

But let’s agree to disagree on this point and move on.

Despite the significance of an employee signing away a legal right that lies at the very base of our civil justice system, there is almost never any effort to explain to the employee what the waiver or arbitration agreement means or even that they are giving up any right at all. In fact, quite the reverse is the rule.

“Almost never”?  That statement barely deserves any credence.  There is no evidence to support this statement.  And additionally, what does it mean to “explain to the employee what the waiver” means? Typically, the provisions state that any claim out of an employee’s employment must be submitted to arbitration instead of the courts. Isn’t that enough? (Yes, say the courts.)

Regardless, employers have been advised to make sure that arbitration agreements are highlighted and not merely stuck in page 32 of a handbook.

And the editorial seems to ignore the positive attributes that alternative dispute resolution can bring to the employee as well.  Arbitration has a place in our “civil justice system” too.  (Indeed, in a 2012 editorial, the Law Tribune voiced its support for passage of the Uniform Arbitration Act. The drafters of that act noted that “the enforceability of arbitration agreements cannot be treated any differently from the enforcement of contracts generally under state contract law” and avoided specific references to employment agreements.)


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2d Circuit Opens Door to Class Action Waivers

Continuing my series of posts this week on recent Second Circuit FLSA cases, today I’ll talk about class action waivers and arbitration clauses.

If that last clause is just legalese to you, let me try to walk you through it and why employers

In a 5-4 decision released this morning in Rent-A-Center, West, Inc. v. Jackson (download here), the U.S. Supreme Court rejected a challenge to an arbitration agreement that purported to address all matters arising out of an employment dispute.  Copyright 2010, Daniel A. Schwartz. All rights reserved.

This decision isn’t the easiest to digest.   First, understand that arbitration provisions governed by federal

Suppose you, as an employer, have union-backed employees. The union files a grievance on behalf of three employees alleging that they did not receive "premium" pay on three holidays.  Because the dipsute cannot be resolved, the matter is sent to arbitration. 

For some employers, defining the issue to be sent to arbitration may not seem