Fighting legal battles with employees and former employees can consume massive resources and put the future and success of a business in jeopardy. Because of this, California employers typically take steps to prevent disputes and avoid litigation when possible. One way to do this is to attempt to prohibit workers from filing class-action claims in an arbitration agreement.
Group legal action can be especially costly for employers and is a major point of contention in workplaces across the U.S. In fact, the right to pursue class-action claims against an employer is one of the cases currently in front of the U.S. Supreme Court.
The issue at a glance
At issue is whether employers can prohibit workers from bringing a class-action claim with arbitration agreements. Often, class action claims are filed in response to wage violations, discrimination and other types of workplace misconduct.
A growing number of employers have created and enforced these agreements in recent years. According to this Reuters article on the issue, estimates suggest that 25 million workers have already waived their option to file a class action lawsuit by signing arbitration agreements. It is important to note, however, that this year California courts have essentially struck down class action waivers.
Those who support class action waivers say that such clauses should be permitted and that there are still options for workers to achieve the same benefits of a class action through other means. On the other hand, critics of efforts to prohibit class action claims argue that doing so violates employee rights to organize.
Group legal action versus case-by-case resolutions
There are pros and cons to group legal action, depending on whether you are a worker or an employer. From an employer's perspective, it is generally preferable to avoid group legal claims and instead address each claim on a case-by-case basis. Doing so can result in fewer plaintiffs and smaller awards.
What happens now?
Conflicting rulings from the 5th Circuit, 7th Circuit, and 9th Circuits. In hearing these consolidated actions, the Supreme Court will decide whether arbitration agreements preventing collective and class actions violate the National Labor Relations Act.