Class And Collective Action Bans Help Keep Low-Wage Workers Trapped In Poverty

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Elizabeth Colman, Paul H. Tobias Attorney Fellow

This October, the U.S. Supreme Court will hear oral arguments in a trio of cases challenging whether employers can legally force workers to accept class and collective action bans as a condition of employment. Proponents of the bans argue that because they are contained in the employers’ forced arbitration clause, the Federal Arbitration Act (FAA) requires courts to enforce the bans.

Workers argue that forcing them to resolve all employment disputes in individual arbitration  violates their right to engage in “concerted activities… for mutual aid and protection,” a substantive right protected by the Norris-LaGuardia Act (NLGA) and the National Labor Relations Act (NLRA). While these cases present important questions on the limits of the FAA, they also provide an opportunity to reflect on why guaranteeing workers’ access to class and collective actions is so essential.

Consider this:

  • The federal poverty line for a family of four lies at $24,600 per year, an average wage of $11.82 per hour, yet almost 20 million employees are paid less than $12 per hour.
  • 46 percent of adults responding to a recent survey conducted by the Federal Reserve, or over 110 million people, would not be able to cover an emergency expense costing $400 without having to sell their possessions or go into debt.
  • An estimated $15 billion are stolen from workers each year solely through minimum wage violations.

As increasingly fewer workers are covered by collective bargaining agreements and government agencies are stripped of the resources needed to enforce workers’ rights1, private enforcement of those rights becomes more essential. Class and collective actions have become the only feasible mechanism for millions of America’s lowest-paid, most vulnerable employees to remedy wage theft and other workplace violations. Yet more and more companies are using class and collective action bans in their forced arbitration provisions to thwart this avenue for relief. In just two years between 2012 and 2014, the percentage of companies reportedly using forced arbitration clauses containing class action bans more than doubled, from 16% to 43%. To file an individual claim in arbitration, employees may be required to pay anywhere from under $200 up to $7,000—an amount that low-wage workers cannot afford2.

When an employer requires its workers to accept a forced arbitration clause that bans class and collective actions, employees are prohibited from banding together to correct widespread harm in the workplace when it occurs. By demanding that all disputes with the company be arbitrated individually, employers suppress employee claims by shifting the economic and emotional burden of bringing suit entirely onto each worker to bear in isolation.

Enforcing class and collective action bans inserted into employers’ forced arbitration clauses is one way to guarantee that the working poor stay that way. As long as low-wage workers are denied the opportunity to come together to vindicate their workplace rights, the dramatic acceleration of wealth inequality likely will continue.

This article was originally published in the 2017 Summer issue of The Employee Advocate, the National Employment Lawyers Association’s quarterly publication for members.

 1 In 2016, the U.S. Department of Labor had only 1,000 employees tasked with investigating and enforcing federal wage and hour laws for more than 135 million workers in over seven million businesses nationwide, the same number the department employed in 1948.

2 Fees are based on those assessed by the American Arbitration Association (AAA), a private company that administers approximately half of all arbitrations in the United States. Filing fees for employees under the AAA Employment Rules may not exceed $200. However, some employers have sought to arbitrate employment disputes under the AAA Commercial Rules, where the initial filing fee for an undetermined monetary claim may require as much as $7,000 out-of-pocket.

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