The Right to Collective Labor Action

You have likely been hearing that the United States Supreme Court ruled against labor interests yesterday. It most certainly did that, though, to be fair, it arrived at its decision through what could be considered a reasonable effort at statutory construction. In the reporting of these cases through the media, a fact that often gets lost is that courts are stuck with the statutes they are called upon to interpret. Thus a correct decision can often be an unfortunate result in terms of the common good. Hence, the proverb, “The law is an ass.”

The issue in the case, Epic Systems v. Lewis [1], was, as framed by the Court, “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?” (Opinion of the Court, p. 1)

Now such a description of the issue foretold the result, of course, indicative as it was of a certain mindset. A more neutral wording of the issue might have been something like, “Are employer-employee agreements requiring resolution of disputes by means of one-on-one arbitration enforceable?”

The way the Court phrased the issue reflected the fiction that employer-employee contracts are always between parties with equal bargaining power. That is simply not the case. The terms of most employment contracts are dictated by the employers. As Justice Ruth Bader Ginsburg noted in her dissent, it has been legislatively recognized that “’the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor…,’” (Ginsburg, J., dissenting, p. 5), but that the Court’s ruling understood the law as requiring “courts to enforce” employers’ “take-it-or-leave-it arbitration agreements as written, including the collective-litigation abstinence demanded therein.” (Id., p. 7)

Now the dispute involved the interface between “the Federal Arbitration Act,” wherein “Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings,” (Opinion of the Court, p. 2), and the National Labor Relations Act, which guarantees to workers, “’the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.’” (Id., p. 11) The Court held that the words “other mutual aid or protection” don’t include litigation, only actions associated with its organizing and bargaining activity, and that it was therefore required to enforce the arbitration agreements.

Your humble servant will own that he cannot see why “other mutual aid or protection” wouldn’t include collective litigation, and thus concurs with Justice Ginsburg’s dissent. The Federal Arbitration Act seems to find its proper application in contracts between merchants or other businesses, which bargain on an equal footing. And the Court’s interpretation goes against the intent of the National Labor Relations Act to equalize the positions of employers and employees. At the same time, I cannot honestly characterize the Court’s decision as categorically irrational.

But even if the ruling of the Court was unquestionably the correct one, the mission here is to compare the result to what is called for by Catholic social teaching; and ever since Rerum Novarum [2], the Magna Carta of Catholic social teaching, it has decidedly been on the side of the right of workers to organize for collective action, and has even held that the terms of employment contracts must fall before the concerns of justice. (See, Rerum Novarum, §45)

But what is unjust about an employment contract that requires one-on-one arbitration in the event of a dispute?

Epic Systems v. Lewis is actually three cases where employees sought what they claimed to be unpaid wages, and wanted to join others similarly situated in a single action. The employers all demanded the one-on-one arbitration called for in the employment agreements. In her dissent, Justice Ginsburg explained the position in which the employees would be placed if the arbitration agreements were enforced:

“The employees in these cases complain that their employers have underpaid them in violation of the wage and hours prescriptions of the Fair Labor Standards Act of 1938…, and analogous state laws. Individually, their claims are small, scarcely of a size warranting the expense of seeking redress alone….But by joining together with others similarly circumstanced, employees can gain effective redress for wage underpayment commonly experienced….To block such concerted action, their employers required them to sign, as a condition of employment, arbitration agreements banning collective judicial and arbitral proceedings of any kind. The question presented: Does the Federal Arbitration Act (Arbitration Act or FAA)…, permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations Act (NLRA)…’to engage in…concerted activities’ for their mutual aid or protection?….The answer should be a resounding ‘No.’

“In the NLRA and its forerunner, the Norris-LaGuardia Act (NLGA)…, Congress acted on an acute awareness: For workers striving to gain from their employers [sic] decent terms and conditions of employment, there is strength in numbers. A single employee, Congress understood, is disarmed in dealing with an employer….The Court today subordinates employee-protective labor legislation to the Arbitration Act. In so doing, the Court forgets the labor market imbalance that gave rise to the NLGA and the NLRA, and ignores the destructive consequences of diminishing the right of employees ‘to band together in confronting an employer.’….Congressional correction of the Court’s elevation of the FAA over workers’ rights to act in concert is urgently in order.” (Ginsburg, J., dissenting, pp. 1-2)

In other words, given the size of most unpaid wage claims, and the expenses associated with litigation, even arbitration, employees who have been cheated of wages, but are required by their employment agreements to resolve their claims through one-on-one arbitration, are disincentived from making claims, since the amount to be recovered in unpaid wages is likely to be less than the expenses of pursuing them. At the same time, unscrupulous employers are incentivized to unjustly withhold wages, knowing that they will be too expensive for their unfortunate employees to pursue. The problem could be resolved by allowing employees to pursue their claims in a collective action, so that expenses could be spread around. But the Supreme Court (and maybe Congress) has just taken that option away.

An outcome like this cannot be characterized as anything but perverse.

The icon of St. Joseph the Worker is by Daniel Nichols.

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