This week, the U. S. Supreme Court voted in a 5-4 ruling to allow employers to compel their workers to sign arbitration agreements, therefore waiving their rights to bring class-action claims on such items as overtime wages and gender pay disparities to court before going through private arbitration.
For several years, the National Labor Relations Board (NLRB) has argued that such waivers violated Section 7 of the National Labor Relations Act (protecting an employee’s right to engage in “concerted activity”) and the Federal Court of Appeals for the Fifth Circuit rejected the argument when the Seventh and Ninth agreed. This prompted the need for the Supreme Court to look at the issue and make a ruling.
Those on the side of employee rights say that this ruling allows employers to “arm-twist” their employees into “take it or leave it contracts” that limit their wage and hour litigation to one-on-one claims, therefore isolating the employees. The NLRB still argues that these waivers violate federal labor law and allows companies to evade responsibilities under workplace statutes. Counsel representing businesses stand firm in their belief that resolving workplace disputes through arbitration is both speedy and cost effective.
Such agreements are usually contained in employee on-boarding paperwork, employment contracts or part of the employee manual. About one in four private sector employees have signed these agreements, many of them not reading the entire waiver or understanding that agreeing to such will require their pay disputes be handled through arbitration prior to filing a lawsuit. Often, employees seek private counsel to only have their cases tossed out or unheard because an arbitration agreement had been executed.
For employers, arbitration agreements may not right for their business. Though you can require employees to sign them, it does not necessarily mean you should. As with any agreement or contract, companies should seek advice from legal counsel to evaluate the need for the agreement and the language needed to make them enforceable. Employers will want to make sure that the agreement is fair, legal and that employees signing them understand what rights they are waiving. The last thing an employer will want is for the employee’s acceptance to be questioned if an issue is pursued.