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May 22, 2019

How Mandatory Arbitration Clauses, Class Action Waivers, and a Shortage of Legal Aid Attorneys Harm Workers

by Hannah M. Begley

Law Students on Workers’ Rights Series

The Law Students on Workers’ Rights series publishes essays from current and incoming students at some of the top law schools in the country. These essays, submitted for the Charles E. Joseph Employment Law Scholarship, address the question “What are the biggest challenges facing workers’ rights in the future?”

In the fight for workers’ rights, there are at least three major obstacles: mandatory arbitration clauses, class action waivers, and a shortage of legal aid attorneys. 

First, mandatory arbitration clauses pose a significant hurdle to workers’ rights. While there is nothing inherently wrong with voluntary arbitration, a mechanism that has historically been used to great effect in labor law disputes, forced arbitration tends to benefit large corporations at the expense of workers’ rights. Mandatory arbitration clauses lock workers into only one option for resolving legal disputes—arbitration. Workers are barred from bringing suit in a court of law, even in cases of egregious race, sex, age, religion, disability, or national origin discrimination or harassment. Arbitrators are not required to follow the law or factor legal precedents into their decision-making process, and workers cannot appeal their rulings even if an arbitrator clearly interprets the law incorrectly. The odds are also stacked against workers in mandatory arbitration proceedings, in part because large corporations are repeat players who know how to exploit the system.

As a result, workers win their cases much less often in the forced arbitration system, and when they do win their damage awards tend to be substantially smaller. Given the Supreme Court’s role in repeatedly reaffirming the legitimacy of mandatory arbitration clauses in cases like Gilmer and Green Tree, mandatory arbitration clauses continue to be one of the biggest challenges facing workers’ rights moving forward.

Class action waivers represent a second major challenge in the fight for workers’ rights. The cost of bringing a case—either through litigation or arbitration—is high. Often, the expense of bringing a case is larger than the potential damage award, making litigation or arbitration infeasible and unlikely. For example, in wage theft cases an individual worker may only be owed $100, but there may be hundreds or even thousands of workers who were cheated out of $100 by a corporation. Class action lawsuits solve this collective action problem by facilitating the aggregation of individual claims. In turn, class actions allow the legal system to hold corporations accountable for the injuries they impose on workers, even if each individual worker’s claim is small.

Problematically, many corporations place class action waivers into their contracts, and hundreds of thousands of workers have unknowingly signed away their class action rights. Worse yet, the Supreme Court ruled that class action waivers are not unconscionable, and that the right to concerted action in section 7 of the National Labor Relations Act does not render class action waivers illegal even if they act as a considerable barrier to concerted action.

In April 2019, the Supreme Court expounded upon this line of precedent in Lamps Plus, where they held that an ambiguous arbitration agreement cannot be construed to require a large corporation to submit to class arbitration proceedings. These precedents mean that many workers’ legal claims will never see the light of day. In the end, then, class action waivers are one of the biggest obstacles facing workers’ rights going forward.

Finally, a shortage of legal aid attorneys is another serious issue for workers’ rights. According to a recent Legal Services Corporation report, in 2017 alone nearly one million low-income people in the United States who sought help from a government program or legal aid organization were turned away due to a lack of adequate resources. A study by the Boston BarAssociation similarly found that in Massachusetts, civil legal aid programs turn away 64% of eligible cases due to budgetary and time constraints. This shortage in representation means that many low-income workers are unable to defend their rights in court, and their legal needs go unsatisfied.

Corporations capitalize on this lack of legal representation to mislead their workers into forfeiting some of their rights and freedoms. For example, many corporations place unenforceable non-compete clauses into the contracts of low-income workers. While these non-compete clauses would not stand up to judicial scrutiny, they trick many low-income workers into remaining in abusive or otherwise non-optimal work environments. Thus, a shortage of legal aid attorneys represents another major hurdle to workers’ rights in the United States.

In sum, three of the biggest hurdles facing workers’ rights in the future are mandatory arbitration clauses, class action waivers, and a shortage of legal aid attorneys.

Reflections from Charles Joseph

Every day, American workers experience workplace discrimination, sexual harassment, and wage theft. The law protects workers from employment violations, but if workers cannot access the courts or find a legal representative, these wrongs go unremedied. Ms. Begley cogently identifies several major obstacles workers face when trying to protect their rights. We’ve previously addressed forced arbitration agreements and class action waivers, and Begley’s essay adds an important dimension to the conversation with her discussion of legal aid attorney shortages. Her thoughtful, spot-on analysis is one reason Begley won the Charles E. Joseph Employment Law Scholarship for the 2019/2020 academic year.

Hannah M. Begley attends Stanford Law. She is currently the Senior Articles Editor for the Stanford Law Review, the Associate Editor for the Stanford Law and Policy Review, and the Co-Director of the Workers’ Rights Pro Bono Project. Begley is the winner of the Charles E. Joseph Employment Law Scholarship for the 2019/2020 academic year.

Charles Joseph has over two decades of experience in employment law. He is the founder of Working Now and Then and the founding partner of Joseph and Kirschenbaum, a firm that has recovered over $120 million for clients.

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