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  • John Bickerman

The Supreme Court and the rise of Arbitration Clauses In Employment Contracts

New Research Shows that the Dramatic Increase in Percentage of Workers

Subject to Arbitration Coincides Closely with Supreme Court Rulings

Alex Colvin, the new Dean of the ILR School at Cornell, has found that more than one-half of all workers are now subject to mandatory arbitration as a non-negotiable term of their employment. According to Colvin, “Under such agreements, workers whose rights are violated—for example, through employment discrimination or sexual harassment—can’t pursue their claims in court but must submit to arbitration procedures that research shows overwhelmingly favor employers.”

The growth in mandatory employment arbitration clauses coincides closely with a series of Supreme Court rulings that all favored employers. In 1992, the year after the initial Supreme

Court arbitration ruling, the percentage of employees subject to arbitration stood at two percent. By the early 2000’s, that percentage had risen to almost a quarter of the non-union workforce. Drawing upon a nationally representative sample of non-union employers from a survey Colvin conducted, mandatory arbitration now covers 56 percent of the non-union labor force. And, among employers with 1,000 or more employees, a staggering almost two-thirds or 65.1 percent of companies have given their employees no option but to adjudicate their claims before an arbitrator. Translated to the non-union labor force, over 60 million workers in non-union private sector jobs have been denied access to the courts, where research has shown their claims would fare better than in arbitration.

Of these employers that require mandatory arbitration, over 30% also prohibit class actions. As a result of the Court’s recent ruling in Epic Systems, the class action waivers are enforceable. Not only have private, non-union employees lost the option of bringing their claims to court, these employees have also been precluded from engaging in collective action to address widespread improper or illegal employment practices. The class action waivers are particularly insidious because individual action may be too expensive to prosecute and may also expose the litigant to retribution. Unsurprisingly, large employers have been more likely to include class action waivers in their employment agreements. Over 40 percent of these employers have done so with the result that almost 25 million employees cannot participate in a class action.

The significance of this research is obvious. The Supreme Court has tilted the balance of power toward employers in their disputes with their employees. The Court’s actions have significantly shifted policy through its opinions rather than policy being made by Congress.



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