Supreme Court Upholds Employers’ Uses of Arbitration Clauses to Block Class Action Lawsuits

Arbitration Clauses

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The U.S. Supreme Court has again deflected a challenge to the use in employment agreements of dispute resolution clauses that mandate arbitration and generally bar class action lawsuits. The May 21, 2018 decision was a close call for employers: a 5-4 decision with the conservative majority carrying the day. Nonetheless, this represents a major victory in their battle against expensive lawsuits that pose extraordinary financial risks.

In Epic Systems Corp. v. Lewis, the Supreme Court dealt with challenges to class action restrictions in arbitration clauses based on the National Labor Relations Act (NLRA), which protect workers’ rights to collective activities. The NLRA guarantees employees the right to unionize and sets up an enforcement scheme under the National Labor Relations Board. After it altered its prior interpretation and held in 2012 that class actions could not be barred by arbitration clauses, challenges were filed based on a conflict between the NLRA and the Federal Arbitration Act (FAA), which provides for the enforcement of mandatory arbitration agreements. In the face of a strong dissent, the Court concluded that the NLRA cannot override the FAA because Congress did not provide for it to do so.

The use of mandatory arbitration clauses that bar class action lawsuits is growing in the Commonwealth. They provide potentially huge benefits by precluding the extreme risks presented by suits involving tens, hundreds or even thousands of employees. It is now common for larger employers who could face class actions by virtue of their sizes to mandate resolution of disputes by individual arbitration, and a growing number of small companies seeks the cost and time advantages arbitration can provide. To be sure, employers who use mandatory arbitration agreements must take care not to trample on employee rights and thereby invalidate their contracts, a result that remains possible under current law. Arbitration clauses are enforced only if they are reasonable and are contained in valid contracts between employees and employers.

Hiking of Minimum Wage to $15/Hour Makes its Way toward the Ballot Box for November 2018

Dissatisfied with the recent increase of the Massachusetts minimum wage to $11/hour and its failed efforts to get the state legislature to move the hourly rate to $15, a coalition of community, religious and labor groups has submitted the issue for referendum vote. Assuming the question moves through the process to the November 2018 ballot, Massachusetts voters will decide whether to increase the hourly rate to $15, a move that surely won’t go over well with some business people.

Proponents of the hourly wage increase are unmoved. They believe $15/hour is necessary to allow low paid workers to afford basic necessities such as groceries, housing and heating. As it is, they say, full-time workers earning the current minimum of $11/hour make only about $22,000 per year. About a million Massachusetts workers will benefit if the rate increase is approved, they contend, and most are above the age of 20. They include nursing assistants, childcare providers, and teachers’ aides, the group says. Anticipating objections to the wage hike, the coalition points out that, despite the increase in the minimum wage from $8 to $11 in recent years, the Massachusetts economy continues to grow strongly.

If approved at the ballot box, the minimum wage will increase by $1/hour each year for four years, beginning in 2019. The measure will also increase the minimum tip wage from $3.75 to $9/hour during the same 4-year period. Under Massachusetts law, tipped employees may be paid less than minimum if their hourly rate plus the tips they receive are equal to or exceed the minimum hourly wage. On December 21, 2017, the Massachusetts secretary of state confirmed that enough signatures were submitted to support the ballot measure. The proposed wage increase now moves to the state legislature, which will have the option to approve it prior to any voting by the public. If that does not occur by May 2, 2018 or if the governor fails to sign a passed measure into law, proponents of the minimum wage increase will need to obtain another roughly 11,000 signatures from Massachusetts voters by July 4 to place the question on the 2018 ballot.