The Profoundly Negative Impact of Arbitration on Workers’ Rights

Lawyers who represent employers regularly argue that there is no real difference between arbitration and jury trials.  They contend that arbitration does not affect the outcomes of cases.  And, it is “cheap and quick,” and the employer pays for the arbitrator.  So what are workers complaining about, anyway?Gear-and-Gavel_dark-blue

But as more and more employment cases are decided in arbitration, there are more and more data confirming the profoundly negative impact that arbitrations have on workers’ rights.  There are usually two main questions in litigation:  who wins, and what do they get.  The answer to each of these questions swings dramatically in favor of employers when employment disputes are forced into arbitration.

In other words, when workers are forced to arbitrate their claims, their likelihood of winning plummets.  In the event that workers win at arbitration, they are awarded much less money than the workers who win in state and federal court.

On February 27, 2014, Professor Alexander J.S. Colvin and Ph.D. Candidate Mark Gough (both from Cornell University’s School of Industrial and Labor Relations) gave an outstanding talk at Berkeley Law exploring the impact of arbitration on the outcome of employment litigation.  The statistics they discussed include the following:

1.  Professor Colvin’s research found “gross differences in arbitral and litigation outcomes.”  Overall, employees had a 57% win rate in state court trials, a 36% win rate in federal court trials, and a 21.4% win rate in AAA arbitration awards.  The average damages in state court were $328,000; in federal court $143,500; and in AAA arbitration $23,500.

2.  Mark Gough concluded that “Arbitration has a significant independent effect on employee outcomes:

These findings are astonishing, but not surprising.  This is exactly why employers are pushing so hard to get employment disputes decided in arbitration.  This is exactly why those who fight for workers’ rights must continue to resist this trend.

Another powerful statistic that Dr. Colvin shared was that 77% of employers were represented in arbitrations by employment law specialists, while only 55% of employees were represented in arbitrations by employment law specialists.  Similarly, 55% of employers were represented by law firms handling multiple abitration cases that year. Only 11% of employees were represented by law firms handling multiple arbitration cases that year.  This scenario creates a perfect storm for employers:  arbitrations are more difficult forums for workers, and workers are represented by lawyers who are not familiar with the arbitration process.

The attorneys at Hunter Pyle Law are committed to fighting for workers’ rights, no matter what the forum.  If you have a question about arbitration, please do not hesitate to contact us at 510.444.4400 or inquire@hunterpylelaw.com.

***The quotations from Professor Colvin and Mr. Gough are used here with permission.  Their talk was part of a day-long conference regarding called Forced Arbitration In The Workplace: A Symposium and organized by The Berkeley Journal of Employment and Labor Law (BJELL) and The Employee Rights Advocacy Institute For Law & Policy.

Hunter Pyle to teach Employment Law at Berkeley Law in Fall 2014

Hunter Pyle (along with Todd Jackson of Lewis, Feinberg, Lee, Renaker & Jackson, P.C.) will be teaching the Employment Law course at Berkeley Law during theGear-and-Gavel_dark-blue Fall 2014 semester.

Hunter Pyle to present at three events in Fall 2013

Hunter Pyle will be presenting at three  events in Fall 2013:

On September 20, 2013, Hunter will participate in a case law update as part of the 4th Annual Alameda County Bar Association Employment Law Symposium.  Hunter’s remarks will focus on significant developments in 2013 in the areas of wage and hour law, class actions, and PAGA claims.  (PAGA claims are representative actions in which employees sue on behalf of the State of California and can recover significant penalties from their employers.  Sometimes these claims are all that employees can bring because employers have forced them to sign arbitration agreements barring class actions. )

On October 10, 2013, Hunter will speak at the Annual Wage and Hour Litigation Seminar (Bridgeport).  He will address the topic of recent developments in the law regarding PAGA claims.

Finally, on October 16, 2013, Hunter will present at the Stanford Law School Trial School Trial Advocacy Workshop.

If You Care About Your Rights In The Workplace, You Should Care A Lot About Italian Colors

For many years, the United States Supreme Court has recognized that an agreement to arbitrate will not be enforced if it prevents the effective vindication of federal statutory rights.  This rule, called the “effective vindication rule,” has its origins in a case from 1985 called Mitsubishi Motors v. Soler, 473 U.S. 614.  Its Gear-and-Gavel_dark-bluepurpose is simple:  to prevent corporations (and others) from crafting arbitration agreements that will for all practical purposes deprive ordinary people of their day in court.

Significantly, from 1985 until now, the effective vindication rule has been repeated and reiterated over and over again.  As Justice Kagan’s forceful dissent in American Express v. Italian Colors explains:

[I]n the decades since Mitsubishi, we have repeated its admonition time and again, instructing courts not to enforce an arbitration agreement that effectively (even if not explicitly) forecloses a plaintiff from remedying the violation of a federal statutory right.  Slip Op. at 4.

Unfortunately, on June 20, 2013, five justices on the Supreme Court decided that almost 30 years of the effective vindication rule had come to an end.  In Italian Colors, those five justices compelled a small company to arbitrate its claims against the gigantic American Express Corporation (“Amex”).  (more…)

Saving Your Constitutional Right To A Day In Court: The Arbitration Fairness Act

Gear-and-Gavel_blackImagine after months of unemployment (not hard to imagine these days), you survive a rigorous application and interviewing process to finally arrive at that climactic moment of landing a job.  In your state of euphoria, and as day one as a perfect no-hassle employee.  You hastily review and sign the standard new hire documents you’re given, knowing that there is nothing you could do about the content, anyways.  You sign everything and vaguely hope you haven’t signed away the soul of your first born.

A while later, well after the new job excitement has worn off, you realize that maybe you should be getting paid for overtime, or maybe your supervisor should stop referring to you by a racial nickname.  Maybe you complain about these new discoveries in your workplace, and are promptly fired.

No problem! You know you have rights.  You contact an attorney with the intention of filing a lawsuit.  Then you realize, those new hire documents you signed on day one have come back to haunt you.  You’re informed that you signed an arbitration agreement and have to submit to binding arbitration.  Binding arbitration with an arbitrator chosen (and paid) by your now nemesis. (more…)

Employers May Not Force Employees to Arbitrate PAGA Claims for Labor Code Violations

Brown v. Superior Court, Case No. H037271 (6th App. Dist. June 5, 2013) represents another important victory for workers in California.  In Brown, the court held that employers may not force employees to arbitrate their claims under California’s Private Attorney General Act, Labor Code section 2698, et seq., also known as “PAGA.”  This is because PAGA claims are representative actions intended to advance a public purpose.  A private agreement attempting to waive the right to take such representative actions is unenforceable because it prevents employees from exercising their unwaivable statutory rights.

In Brown, the plaintiffs had signed an arbitration agreement that waived their right to pursue any type of class or representative action.  In their lawsuit, the plaintiffs brought claims for unpaid wages and overtime, among others.  They also brought claims under PAGA.  (Many sections of the California Labor Code provide for civil penalties, often in the amount of $50 or $100 per violation.  PAGA allows employees to bring representative actions to recover those penalties in representative actions brought on behalf of other employees.)

The employer then attempted to force the plaintiffs to arbitrate all of their claims, including their PAGA claims.  If successful, this would have resulted in the plaintiffs losing their right to pursue claims on behalf of other employees.  The trial court agreed with the employer.  However, the Court of Appeal for the Sixth Appellate District blocked the employer from doing so. (more…)

On-Duty Meal and Rest Breaks: Workers May Proceed In Class Action Even If Some Got Breaks

The recently published decision in Faulkinbury v. Boyd & Associates, G041702 (Cal.App.4th May 10, 2013) (Faulkinbury II) clarified several important issues in wage and hour class actions.  First, the court held that a trial court must certify a class where an employer requires all employees to sign meal-break waivers-evenGear-and-Gavel_dark-blue when some of the employees are able to take off-duty meal breaks.  Second, the court held that the lack of a uniform rest break policy may create a common issue that is sufficient for class certification.  Third, the court held that an overtime policy that fails to include bonuses and other allowances in calculating the overtime rate of pay presents common questions suitable for class treatment.
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A Victory For Low-Wage Workers: Class Actions Remain The Best Way To Protect The Rights Of Large Numbers Of Employees

Class actions are important tools for protecting the rights of workers-particularly those workers on the lower rungs of the economic ladder.  When large numbers of these workers are denied their rights in the workplace-such as overtime pay or meal and rest breaks, they can join together in a class action to demand justice.Gear-and-Gavel_dark-blue

Large and powerful companies that have been subject to this type of litigation hate class actions.  And it is no secret that these business interests have seduced the conservative faction of the United States Supreme Court into doing their bidding.  In decision after decision, those same five justices have contorted the law, the facts, and their rational facilities, in an attempt to gut the class action device.  Arbitration (Concepcion), removal to federal court under the Class Action Fairness Act (Standard Fire), and class certification itself (Dukes) have all been manipulated in an overt effort to prevent poor and working class people from having their day in court.

Thankfully, there are many brave and conscientious judges who have resisted this trend.  For example, on May 28, 2013, the Court of Appeals for the Ninth Circuit issued its opinion in Leyva v. Medline Industries, Inc.  Leyva addressed the critical issue of whether individual damages calculations can defeat commonality for the purpose of class certification.  For many years, in both the state and federal courts, the answer to that question had been no.  See, e.g., Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975); Brinker v. Superior Court, 273 P.3d 513, 546 (2012). (more…)