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Thanks to a recent Supreme Court ruling, corporations are increasingly using forced arbitration to undermine state and local worker protections.
In May 2016, Brenda Rojas was hired as a server at a national chain restaurant in Salem, Oregon. On her first day, a manager sat down with her and five other new hires and handed them each in turn a tablet, asking them to tick off check boxes on the screen under their name.
“He just told us, ‘Oh, this is just saying that you’re not going to sue us ever,’” Rojas says of the legal forms she was given. “’And if you don’t sign it, you don’t get hired.’”
Rojas didn’t understand what the document said, but she signed it anyway. So did the other hires. “We all needed the job,” she says.
The job turned out to be grueling: For the first four months, she worked closing shifts, doubles, and back-to-back weekend days. Men in management often made crude comments about the women who worked there; one told an employee directly that he wanted her to wear tighter jeans, Rojas says. When she told another manager, a woman, about the incident, nothing happened.
At the end of summer, Rojas asked her managers to dial back her hours as she went back to school. They punished her by giving her undesirable duties or no shifts at all, she says. “I remember an instance where someone wanted to talk to human resources,” Rojas says. “Someone else said, ‘Oh, don’t do that,’ and discouraged them from talking to human resources, because if our managers found out, we would lose hours.”
Rojas quit about a year after taking the job. Even now, she doesn’t want to name the national chain, she says, because she doesn’t know what contracts she signed.
Oregon has some of the strictest workplace protections of any state in the nation. But these rights, which are designed to protect workers from the kinds of harassment and retaliation that Rojas says she endured, only matter when they are enforced. Between budget cuts and recent court rulings, corporations have new ways to get around strict labor protections.
At issue are forced arbitration clauses that require employees (and consumers) to waive their rights to class-action lawsuits. Such contracts are becoming increasingly ubiquitous: According to a new report from the Center for Popular Democracy, Economic Policy Institute, and National Employment Law Project, forced arbitration will apply to more than 80 percent of the non-union private-sector workforce by 2024.
“The right to be paid a livable minimum wage, to take meal and rest breaks, to safe workplaces, and to equal earning and promotion opportunities regardless of race, gender, ethnicity, or other social category—all of these important rights are at risk of being hollowed out by underenforcement,” the report reads.
Forced arbitration also represents a kind of corporate preemption of local and state law. From Albuquerque to Tacoma, more than 40 cities and counties have passed a higher minimum wage than state law requires. Some two dozen municipalities have local paid sick leave laws on the books. And in at least a dozen cities and counties, worker protections cover “safe” days—paid time off for victims of domestic violence.
In Oregon, for example, workers such as Rojas ostensibly enjoy the broadest paid leave policy around, with guaranteed paid time off for victims of domestic violence, sexual assault, sexual harassment, and stalking to seek counseling or other social services. As of 2018, state law requires restaurants and other employers to provide a good-faith estimate of work schedules, even for part-time shift workers. These rights are in addition to a minimum wage that is higher than the federal level (and indexed to inflation)—and higher still in the Portland metro area.
Yet wage theft is a pervasive problem for the entire economy. In the 10 most populous states, some 2.4 million workers lose $8 billion every year to minimum wage violations, according to the report.
There are two forces eroding the enforcement of these workplace rights. One is austerity: State and federal budgets for the public agencies meant to protect workers have been cut to the bone, leaving them understaffed even as the workforce they monitor has grown. In Oregon, for example, the state’s department of labor has 35 wage and hour enforcement investigators—meaning that each investigator has a caseload of roughly 4,400 businesses and 55,000 workers. And that’s the best ratio among the six states in this study: Massachusetts’s 19 investigators are each responsible for nearly 189,000 workers.
The other threat to enforcement is forced arbitration. Last year, the Supreme Court affirmed in Epic Systems v. Lewis that companies can require workers to resolve disputes through binding arbitration. Since then, the court has ruled that corporations can require employees to contractually waive their right to class arbitration. Chief Justice John Roberts has steadily ruled for the rights of corporations, and against plaintiffs.
Deepak Gupta is an attorney who teaches a seminar on forced arbitration at Harvard Law School. (Disclosure: He’s also a friend of mine.) He testified about these contracts before the House Judiciary Committee on May 16, and has argued before the Supreme Court on behalf of consumers in key cases on forced arbitration, including American Express v. Italian Colors Restaurant and AT&T Mobility v. Concepcion.
Gupta described wage theft as a transfer of “billions of dollars from workers to employers,” an issue that calls for a legal mechanism that enables workers to join together to pursue their rights in court.
“If you cut off that [legal] avenue, which is what forced arbitration, in my view, is principally designed to do, that’s going to result in a massive transfer of wealth,” Gupta testified.
A recent study in the North Carolina Law Review describes mandatory arbitration agreements as “less as a mechanism of ‘alternative dispute resolution’ than as an ex ante waiver of legal rights by employees.” That study found that 98 percent of workers with disputes abandon their claims when their only option is arbitration.
Some workers are still trying anyway. After a class action suit against Chipotle brought by thousands of workers fizzled due to the Supreme Court’s ruling, about 150 workers decided to push forward with arbitration—an expensive prospect for a ubiquitous chain with workers located everywhere. (So far, Chipotle has opted to simply not pay its share of the arbitration fees.) Drivers for Lyft and Uber have tried the same strategy.
States have discovered some legal pathways to pursue actual alternative class claims. California has led the way with the Private Attorneys General Act, which deputizes workers or consumers to pursue a class action on behalf of the state. Six states have introduced similar bills in 2019. Business groups are fighting back aggressively against PAGA claims.
Ultimately, any structural change will fall to Congress. Two bills put forward by Democrats would shore up enforcement: The Restoring Justice for Workers Act would ban mandatory arbitration and collective-action waivers in labor contracts, canceling Epic Systems. The Forced Arbitration Injustice Repeal Act would go further, eliminating forced arbitration clauses in employment, consumer, anti-trust, and civil rights disputes.
Congress has taken action before to push back against the Roberts court. In 2007, the Supreme Court’s decision in Ledbetter v. Goodyear restricted the statute of limitations under which employees can pursue claims of discrimination. Two years later, Congress passed the Lilly Ledbetter Fair Pay Act, expanding the rights of workers under the Equal Pay Act of 1963. With Democrats now in charge of the House, there’s renewed interest in pursuing such legislation for wage and discrimination enforcement, but little hope of it passing the Republican-controlled Senate.
Rojas still doesn’t know whether the contract she signed with the national restaurant chain would have required her to pursue her complaints about the hours or hostile work environment through arbitration. (I checked, and I believe the answer is yes.) But she knows she’ll never sign another agreement like that in the future without getting a copy.
“I thought I had to sign,” Rojas says. “I was younger. I still don’t know what I signed.”
Kriston Capps is a staff writer for CityLab.