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Employers Protect Themselves with Arbitration Proceedings, SCOTUS helps

The spate of recent Supreme Court rulings against employees are already trickling down through the federal courts. Following the Supreme Court’s lead in AmEx v. Italian Colors, the Second Circuit held that an arbitration clause that prevents employees from bringing class actions was binding and not against public policy, despite the fact that such arbitration clauses pretty much guarantee that employees cannot enforce their rights.

When new employees start working, they often sign reams of paperwork, much of which they may not understand. Recently, employers have been including language preventing people from bringing class action lawsuits, or even class action arbitrations, against their employers. What this means is that someone, like Ms. Sutherland in this case, whose overtime rights have been violated to the tune of $1,867 simply cannot find a lawyer to take her case. If she brings a case individually all the way through arbitration, she could end up paying 100 times what she’s owed. But lawyers can’t work for free. The result is that many people with small claims can bring suits together, or they can represent everyone all at once (in a class action). This way the lawyer is paid as a percentage of what she recovers for everyone, spreading the cost around and allowing people to protect themselves from these kinds of violations.

After all, $1,867 is a lot of money to most people. And if an employer, like Ernst & Young in this case, are violating a lot of people’s right to $1,867 in overtime, then the employer may be stealing hundreds of thousands of dollars’ worth of wages in from their employees.

Now, thanks to the Court’s decision in AmEx v. Italian Colors, they can continue to steal their employees’ wages with impunity. As long as the employer’s actions only cost the employee a little less than the cost of hiring a private lawyer, the employer knows full well that they’re in the clear. No one can afford to bring a lawsuit, and so long as they can convince new employees to sign on the dotted line, they can prevent employees from pooling their resources and suing together. And what new employee has the power to refuse to sign a document?

The good news is that not all arbitration agreements are binding, and not all employees are helpless to negotiate. At the very least, if you face the prospect of signing an arbitration agreement that doesn’t sound right to you or your employer is threatening to hold you to an agreement that you’ve already signed, consult a lawyer.