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SAUL LOEB/AFP via Getty Images A 2018 Supreme Court decision was ‘one of the most important workplace class action rulings in the last two decades,’ a new report said.
Two years ago, the Supreme Court made it more difficult for workers to band together and collectively sue their employer over unfair treatment and stiffed pay.
Now that companies have had time to absorb the 5-4 decision and potentially update their policies, some observers say the decision’s effects are starting to show.
2019 marked the first year in more than a decade that federal class-action lawsuits alleging unpaid wages, job discrimination and mishandled retirement benefits were all down from the year before.
That’s according to an annual look at workplace class-action cases from Seyfarth Shaw, an international law firm representing companies in employment litigation.
Attorney Gerald Maatman has been writing the report for 16 years, and this is the first time he’s seen a year-over-year decline in all three categories of workplace class-action litigation.
“That, to me, is a manifestation of the Epic Systems case,” he said, referencing the 2018 court decision that ruled companies can make workers waive their class-action rights when agreeing to arbitrate a workplace dispute.
“When the Supreme Court greenlighted the enforceability of class-action waivers, that was the last remaining impediment” on whether it was worth it for companies to adopt an arbitration program, Maatman told MarketWatch.
The “transformative” decision “is one of the most important workplace class action rulings in the last two decades,” Maatman wrote in his annual report.
Compared to 2018, there were 233 fewer employment discrimination cases filed in federal court, 714 fewer wage and hour cases, and 602 fewer cases brought under a statute setting standards on how employers administer health and retirement benefits. Overall there was a 5.8% decline in those three types of cases from 2018 to 2019. The cases encompass lawsuits filed by plaintiffs’ attorneys and federal regulators.
In line with the new across-the-board dip for all three types of workplace class action cases, 2019 overall filing rates continue a years-long downward trend.
There were almost 25,000 workplace class action lawsuits filed in 2019, according to the Seyfarth Shaw report. That’s down from more than 30,000 suits initiated in 2010.
Before the 2018 Supreme Court decision, many companies were already expanding their procedures to hear and resolve workplace grievances internally, rather than in a courtroom, Maatman said. Often, that was through the increased use of arbitration, he said.
Whether the drop in class-action cases is a positive trend depends on point of view. Arbitration, compared to class actions is “certainly quicker and less costly. It is a good thing if one is interested in efficiency and effectiveness,” Maatman said.
But James Cooney, a professor at the Rutgers School of Management and Labor Relations, said fewer class actions weren’t a good thing from where he stood. The large-scale lawsuits could help resolve disputes in one fell swoop rather than a slew of individual lawsuits.
Cooney, who is also an arbitrator between employers and unions, said the Epic Systems decision helped explain the decline in filings. The ruling fit a pattern since Chief Justice John Roberts has led the country’s highest court, Cooney said. “The Supreme Court has issued a string of decisions chipping away at workers’ rights to obtain class certification.”
Make no mistake, class actions are not going away. In fact, the law firm’s same report noted courts formally certified 64% of employment discrimination cases and 65% of cases dealing with alleged mistakes in the administration of benefits. Formal court certification is a key hurdle when pressing a class-action case.
David Sanford, chairman of Sanford Heisler Sharp, a firm representing workers, said, “our firm is currently litigating over a dozen class-action matters” and the claims range from discrimination to missed out wages. “If there have been fewer cases filed nationally in the recent past, we certainly have not been a part of that trend.”
Either way, the lawsuit statistics reinforce the fact that many American workers these days will have to go to an arbitrator if they have a problem at work.
The Economic Policy Institute, a left-leaning think tank, projects that in four years, almost 83% of private sector workers in America will be subject to mandatory arbitration. The organization estimated 56% of workers had mandatory arbitration clauses in their contracts.
Think tank researchers have said the prevalence of arbitration clauses is a worrying sign because arbitrations don’t give workers a fair hearing, or the resources of the American legal system — like a jury by one’s peers. They also happen behind closed doors.
Last year, the Democrat-controlled House of Representatives passed the Forced Arbitration Injustice Repeal Act, which would ban mandatory use of the proceeding to resolve consumer and worker complaints.
Maatman disputes the suggestion that arbitrators are slanted towards employers. “That’s an awfully broad generalization. Arbitrators call them as they see them,” he said.
Of course, not all companies use mandatory arbitration — especially in the context of the #MeToo moment, as women complained arbitration rules kept their sexual harassment allegations quiet.
In late 2018, Google GOOG, +0.31% stopped using mandatory arbitration for sexual harassment allegations and then decided in early 2019 to stop using the method for worker disputes.
“While arbitration can have a number of advantages over being in court in resolving disputes quickly and fairly, we have made arbitration optional for current and future employees for all workplace matters. We expect some employees will still choose arbitration for employee disputes,” said a Google spokeswoman.
