New report looks at rise of class-action bans in employment contracts

Employees in low-wage workplaces, women and African-Americans are more likely to be subject to mandatory arbitration agreements in employment contracts than other groups, potentially limiting their access to the court system, a study released recently by the Economic Policy Institute found.

The survey authored by Cornell University professor Alexander Colvin found that 57.6 percent of female workers, 59.1 percent of African-American workers and 53.5 percent of male workers are bound by mandatory arbitration agreements.

Nearly 65 percent of workplaces where the average wage is less than $13 an hour also require mandatory arbitration agreements for their employees.

Colvin’s study also found that since 1991, the existence of such agreements has risen from just over 2 percent to nearly a quarter in the early 2000s, to more than 55 percent of workers today, which he says lessens the access of employees to the courts for a variety of civil rights and labor rights claims, representing a “dramatic and important shift in how the employment rights of American workers are enforced,” according to the report.

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Mandatory arbitration agreements are most widespread in California, Texas and North Carolina. In all of the 12 largest states by population, more than 40 percent of employers have these policies, the survey found.

The issue draws significance as the U.S. Supreme Court weighs a trio of cases that challenge whether class action waivers should be allowed in employment contracts. Mandatory arbitration agreements have also found new scrutiny amid the #MeToo movement, as women speak out against past workplace abuses and the efforts of employers to keep those issues out of court.

“Under such agreements, workers whose rights are violated—for example, through employment discrimination or sexual harassment—can’t pursue their claims in court but must submit to arbitration procedures that research shows overwhelmingly favor employers,” Colvin writes in the report.

The findings build off a 2017 study from the worker-friendly policy group that found more than half of private sector nonunion jobs are subject to mandatory arbitration, a trend the report found has accelerated since the 1990s. Among private-sector nonunion workers, 56.2 percent are subject to mandatory employment arbitration, which would mean more than 60 million American employees have no recourse to the courts in legal disputes and must go to arbitration, the survey found.

Larger employers were more likely to impose such agreements, which are different from the system used to resolve employment disputes between labor unions and management in organized workplaces. More than 65 percent of employers with 1,000 or more workers have mandatory employment arbitration, the study found.

Among the employers that require mandatory arbitration, 30 percent include class-action waivers that prevent them from taking collective legal action, according to the report.

The Supreme Court heard arguments in October, in a trio of cases—National Labor Relations Board v. Murphy Oil USA, Ernst & Young LLP v. Morris and Epic Systems v. Lewis—that consider whether the class action waiver violates the federal law that protects workers’ rights.

Colvin said a ruling in favor of the employers would encourage more businesses to adopt mandatory employment arbitration and class action waivers.

The U.S. Chamber of Commerce’s amicus brief, filed by a team from Mayer Brown, urged the Supreme Court to uphold the lawfulness of mandatory arbitration.

“Most workplace grievances are individualized and therefore could not be pursued as part of a class or collective action. Indeed, without individual arbitration, most of those claims could not be pursued at all,” Mayer Brown’s Andrew Pincus, counsel of record, wrote. “The best empirical data available show that employees fare at least as well in arbitration as in litigation, if not better; and that litigation in court is frequently too expensive to serve as a realistic option for employees seeking to vindicate their rights.”