U.S. Supreme Court Damages Labor Rights by Ruling that Employers Can Legally Prevent Employees from Joining Together in Class Actions

Employers vs. employees — one of the core societal conflicts plays out again, benefiting management over labor as usual. Perhaps the solution is to make the employees the collective employer, so that the workers themselves can democratically decide who is hired and fired and what workplace provisions are applied. In any case though, it’s a serious affront to labor rights, with the law of contracts — a conservative pillar of democracy before modern “conservatism” turned into an ideology trying to justify giving as much money to rich people as possible — being further worsened.

The U.S. Supreme Court on Monday dealt a blow to worker rights, saying that employers can bar their employees from banding together to challenge workplace abuses including wage theft and sexual harassment.

MSNBC host and legal analyst Ari Melber summed up the 5-4 decision (pdf) by tweeting: “Supreme Court rules that you have the right to your day in court, unless a corporation effectively makes you give up that right.”

Political activist Zephyr Teachout, meanwhile, said the decision “is terrible news for workers in America,” as it makes “it harder for employees to get a fair hearing when they are screwed.”

When employers mandate arbitration clauses, employees must act as individuals to challenge alleged workplace abuses, and are thus barred from gaining strength in numbers through class action suits to challenge corporate power. In the cases before the high court, employers had argued they had the right to impose such contracts under the Federal Arbitration Act, while employees argued they had the right to take collective action under the National Labor Relations Act (NLRA).

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Justice Ruth Bader Ginsburg wrote the dissenting opinion, and read a summary of her dissent aloud—”something justices do only rarely to signify their objections,” USA Today reported.

Ginsburg called the decision “egregiously wrong,” and asserted: “Recognizing employees’ right to engage in collective employment litigation and shielding that right from employer blockage are firmly rooted in the NLRA’s design.”

She further noted that made “to face their employers without company, employees ordinarily are no match for the enterprise that hires them. Employees gain strength, however, if they can deal with their employers in numbers. That is the very reason why the NLRA secures against employer interference employees’ right to act in concert for their ‘mutual aid or protection.'”

“The inevitable result of today’s decision ,” she added, “will be the under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

EPI’s McNicholas urged Congress to take action to prevent that from happening.

“It is essential to both our democracy and a fair economy that workers have the right to engage in collective action,” she stated. “Congress must act to restore this fundamental right and ban mandatory arbitration agreements and class and collective action waivers.”

Senate Overturns CFPB Ban on Prohibiting Class Action Lawsuits Against Banks

The CFPB ban would have lessened the exploitation of the general public by the big banks, and since that represented a threat to the big banks’ profits, they used their power to have this ban repealed quickly.

The measure overturns the so-called arbitration rule, which would have banned banks, credit-card companies and other financial firms from requiring customers to settle disagreements through arbitration rather than in the courts. The mandate often appears as a fine-print clause in customer agreements.

Another article notes that despite majority support for the ban on prohibiting class action lawsuits against financial corporations, the rule was still overturned.

“The bill was entirely and exclusively supported by the [finance] industry,” said F. Paul Bland, an attorney at Public Justice, a consumer group. “Every group that represents consumers was strongly against the bill.”

Bland listed special interest groups that opposed the bill: armed service member groups, senior citizen groups, civil rights groups. “Lots of polling said both Republicans and Democrats oppose the bill by heavy margins,” said Bland. “This was the Wells Fargo immunity act. It’s essentially a bailout for those companies.”

For Wells Fargo, Equifax, and other companies that behave badly on a major scale, preventing consumers from banding together to seek justice is a major boon that could save these companies from an unknowable amount of damages.

From a report out months ago:

While the average consumer who wins a claim in arbitration recovers $5,389, this is not even close to a typical consumer outcome. Why? Consumers obtain relief regarding their claims in only 9 percent of disputes. On the other hand, when companies make claims or counterclaims, arbitrators grant them relief 93 percent of the time—meaning they order the consumer to pay. If you consider both sides of this equation, in arbitration, the average consumer is ordered to pay $7,725 to the bank or lender. That’s right: the average consumer ends up paying financial institutions in arbitration.

But let’s consider the consumers who do win in arbitration. How do those numbers stack up against class action lawsuits? In an average year:

  • At least 6,800,000 consumers get cash relief in class actions—compared with just 16 consumers who receive cash relief in arbitration, according to available data.
  • Consumers recover at least $440,000,000 in class actions, after deducting all attorneys’ fees and court costs—compared with a total of $86,216 in arbitration.

Banning consumer class actions lets financial institutions keep hundreds of millions of dollars that would otherwise go back to harmed consumers every year.