Hold Your Applause on Supreme Court Arbitration Decision

Posted by Tom Jones on Jun 4, 2018 1:04:23 PM

supremecourt.smallThe decision by the United States Supreme Court last week upholding the use of arbitration agreements to prohibit class-action lawsuits generated widespread cheering in the business community.

But employers would be well advised to hold their applause. 

That’s because this Supreme Court decision is unusual in that it does not draw a bright line making it clear what employers may or may not do. It simply opens the door for employers to pursue mandatory arbitration as an option.

Most importantly, the decision does not allow employers to use arbitration agreements to escape the “onerous” aspects of legally established remedies.

The court has made clear that while arbitration involves a change of forum from the courts to the private arbitration arena, and an elimination of class actions, it does not change workers’ substantive rights. Arbitrators must apply the same law that a court would apply and award the same substantive remedies for proven violations.

Employees will still be able to file a claim for nonpayment of wages, sexual harassment, or other adverse consequence at work.  They just won’t be able to do it as a class action.

The best advice to employers any time they face a new legally justified option - take time to weigh the options before moving ahead.  

The Supreme Court ruled that companies may use arbitration clauses in employment contracts to prohibit workers from banding together to take legal action over workplace issues. The vote was 5 to 4, with the court’s more conservative justices in the majority. The court's decision could affect some 25 million employment contracts.

Writing for the majority, Justice Neil M. Gorsuch said the court’s conclusion was dictated by a federal law favoring arbitration and the court’s precedents. If workers were allowed to band together to press their claims, he wrote, “the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace.”

The ruling does not necessarily invalidate Massachusetts law on the topic of arbitration.

For example, a Massachusetts case from a few years ago centered around an arbitration waiver agreement that prohibited plaintiffs' recovery of multiple damages in any arbitration proceeding - a provision that directly conflicted with the Massachusetts mandatory treble damages law.

In 2013 the Massachusetts Supreme Judicial Court (SJC) declared the waiver of multiple damages in the arbitration agreement unenforceable, ruling that the FAA (Federal Arbitration Act) did not preempt the SJC from holding that waiver of multiple damages in these circumstances is void as contrary to Massachusetts public policy.

Given that arbitration is really a procedural strategy, there are many questions you should consider before adopting a change in your company’s practices. Some questions to ask yourself as a company include:

  • How will arbitration be a benefit to us?
  • How much will it cost to use it?
  • What is the potential cost vis-a-vis the likely benefit?
  • Will we be better off as an employer with such a policy in place?
  • If so, how?
  • How often do we get sued?
  • What issues do we get sued for? Wages? Discrimination?
  • If or when we do get sued, what is our success record under the current rules?

Consider that in discrimination cases filed at the Massachusetts Commission Against Discrimination (MCAD), the agency found “Lack of Probable Cause” (i.e. the case was dismissed) in 87 percent of the cases filed, according to its most recent annual report. Are you likely to do any better with an arbitrator?

One other thing to keep in mind is that federal and state administrative agencies, such as the Equal Employment Opportunity Commission (EEOC) or MCAD, are not bound by private arbitration agreements; they are able to sue over statutory rights where private claimants may not bring a case.

Before jumping on the bandwagon of arbitration, you need to engage in due diligence to see if it makes sense for your company.

Topics: Employment Law, U.S. Supreme Court

Supreme Court Health Reform Ruling Has Little Effect on Massachusetts

Posted by Rick Lord on Jun 28, 2012 9:33:00 AM

The United States Supreme Court ruling moments ago upholding key provisions of federal health care reform means that the rest of the country will continue to move down a path that Massachusetts employers have already walked under the commonwealth’s own health reform law for six years.

Health Care ReformThat’s good news because the oft-maligned 2006 Bay State reform established a foundation for the market and political changes that now promise to control the soaring cost of health insurance for Massachusetts employers.

The high court ruled in a 5-4 decision that the portion of federal reform that requires everyone to purchase health insurance – the so-called individual mandate - is constitutional. The ruling leaves intact other portions of the law, including tax credits for small business to help them cover the cost of insurance for employees; no-copay preventive care; the ability of children to remain on their parent’s health insurance until age 26; and a prohibition against insurance companies denying coverage to people with pre-existing medical conditions.

The court ruled that the mandate violates the commerce clause of the Constution, but is permissable under the taxing power of Congress.

“Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it,” Chief Justice John Roberts wrote in his majority opinion.

Massachusetts now faces the task of reconciling the details of the 2006 state reform with the federal law. Some elements of that reconciliation will require legislative action.

The Supreme Court decision also upheld the federal reform law’s Medicaid expansion, though it noted it would be unconstitutional for the federal government to withhold Medicaid funds for non-compliance with the expansion provisions. Massachusetts expects the Medicaid expansion to provide hundreds of millions of dollars in federal dollars to extend coverage to people.

"Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding," Roberts writes.

The 2006 law is far from perfect. Providing health insurance to people did not, as experts predicted, significantly reduce usage of expensive hospital emergency rooms. Heavy government intervention was required to control small-group premiums. And even now, AIM is asking the legislature to change the fair-share formula so employees are not penalized for workers who obtain insurance on a spouse’s plan.

But the effort - forged from a sense of shared responsibility among employers, lawmakers, doctors, hospitals, consumers and insurance companies – clearly succeeded in reducing the share of Massachusetts residents without health insurance from 6 percent to 2 percent. It ultimately addressed one piece of the health puzzle – providing people access to care – so the commonwealth could begin to solve the more important piece – reducing the cost of health care and health insurance.

The Massachusetts health care market is moving aggressively to restructure itself in ways that will benefit engaged employers. Health providers, insurance companies and employers are working together to change the way consumers pay for medical care, introducing innovative products such as tiered and limited health plans that reward consumers for receiving high-quality care in reasonably priced settings, and implementing “global payments” that reward doctors for good outcomes instead of the number of procedures they order.

The results so far are encouraging. The average health insurance premium increase approved the state’s Division of Insurance in the small group market for July 2012 is 0.7 percent, down from 16.3 percent just two years ago. Two insurers, Fallon and Tufts, actually plan to lower rates. Overall, contracts negotiated by health insurers with providers in 2011 gave hospitals and doctors groups average fee increases of 2 to 3 percent, roughly half those given in 2010 and less than in any year since 2005.


Topics: Health Care Reform, Issues, U.S. Supreme Court

Supreme Court Affirms Limits on Union Assessments to Non-Members

Posted by Christopher Geehern on Jun 21, 2012 10:54:00 AM

The United States Supreme Court affirmed today that unions may not force non members to fund political activities without permission.

UnionsThe high court ruled 7-2 in Knox vs. SEIU that the Service Employees International Union violated the First Amendment rights of government employees in California by assessing them for the cost of two political campaigns without seeking their affirmative consent. The employees were part of an “agency shop” where all workers are represented by a union, but where employees could decline to join the union as long as they pay the union a fee to cover non-political expenses.

Unions are required to provide a so-called Hudson notice to non-members allowing them to opt-out of contributions to be used for political activities with which they disagree.

“There is no justification for the SEIU’s failure to provide a fresh Hudson notice. Hudson rests on the principle that nonmembers should not be required to fund a union’s political and ideological projects unless they choose to do so after having ‘a fair opportunity’ to assess the impact of paying for nonchargeable union activities,” Associated Justice Samuel Alito wrote for the majority.

“The SEIU’s procedure cannot be considered to have met Hudson’s requirement that fee-collection procedures be carefully tailored to minimize impingement on First Amendment rights."

The Court did not accept the SEIU’s broad definition of non-political activities that could be charged back to employees who elected not to join the union.

“First, the SEIU’s understanding of the breadth of chargeable expenses is so expansive that it is hard to place much reliance on its statistics. ‘Lobbying the electorate,’ which the SEIU claims is chargeable, is nothing more than another term for supporting political causes and candidates,” the decision states.

Alito was joined in the majority by Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, Sonya Sotomayor and Ruth Bader Ginsburg.

The Knox decision echoes a ruling in the private sector from the 1980s - Beck vs. Communication Workers of America - in which the Court ruled that objecting nonmembers may not be required to pay union dues. Rather, the Court found that objecting employees may only be compelled to pay an agency fee, an amount that encompasses only costs associated with collective bargaining, contract administration, or grievance adjustment.

Topics: Unions, Issues, Human Resources, U.S. Supreme Court

Court Decisions Leave Companies Treading Carefully with Employees

Posted by Erica Murphy on Jan 26, 2011 1:37:00 PM

Separate rulings this week from the United States Supreme Court and the Massachusetts Supreme Judicial Court will significantly limit the actions that employers may take when addressing conflicts with employees.

Employment lawThe U.S. Supreme Court ruled unanimously on Monday that an employee who was terminated shortly after his fiancée filed a discrimination charge against their mutual employer may sue under Title VII of the Civil Rights Act of 1964 for third-party retaliation.

In Massachusetts, the Supreme Judicial Court ruled on Tuesday that a company may not dock a worker’s pay after unilaterally determining that the worker was responsible for damaging property.

The decision about third-party retaliation came in Thompson vs. North American Stainless LP. Eric Thompson and his fiancée, Miriam Regalado, were employees of North American Stainless, LP (NAS).  Three weeks after Regalado filed a sex discrimination charge against NAS with the Equal Employment Opportunity Commission (EEOC), the company fired Thompson.  Thompson filed suit against NAS under Title VII claiming that the company fired him to retaliate against Regalado for filing her EEOC charge. 

The Supreme Court ruled that “injuring [Thompson] was the employer's intended means of harming Regalado…In those circumstances, we think Thompson well within the zone of interests sought to be protected by Title VII.”

According to the Court, Title VII’s anti-retaliation provision covers conduct that “might have dissuaded a reasonable worker from making or supporting a charge of discrimination.”  The Court unanimously concluded that it is “obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.” 

Bu the Court refused to identify a class of relationships for which third-party retaliation would be unlawful. So while this decision will likely result in more lawsuits being filed by spouses and significant others, the Court’s reluctance to define “zone of interests,” makes the practical implications of the decision somewhat difficult to predict.

For now, employers should tread carefully before terminating a spouse or close relative of an employee who filed a discrimination charge or lawsuit.  Employers should also re-examine policies and procedures for dealing with internal complaints in an effort to minimize the risk of a retaliation complaint.

According to EEOC statistics, retaliation became the most frequently cited form of on-the-job discrimination in 2009 (33,613 charges), overtaking race discrimination (33,579 charges) by a slim margin.  Given this decision, those numbers are likely to increase further. 

The Massachusetts ruling came in the case of ABC Disposal Service Inc., a New Bedford-based trash and recycling pickup company that wanted to cut down on damage by their workers to the company trucks and other people’s property.

The company instituted a policy saying that if it determined that an employee was at fault, the workers could either agree to pay for the damage through a deduction from their wages or be disciplined. The company said that the program led to a substantial reduction in damage. But the SJC said that under the Massachusetts Wage Act, employers are prohibited from making such deductions.

“The statutory language and the interplay of §§148 and 150 of the Wage Act reflect that employee deduction agreements of the type at issue in this case constitute special contracts that §148 prohibits unless the deductions are valid setoffs for clear and established debts within the meaning of §150,” Judge Margot Botsford wrote for the SJC.

Stay tuned to the HR Edge and the AIM Business Insider blog for additional detailed information and updates. 

Topics: AIM, Employment Law, U.S. Supreme Court, Massachusetts Supreme Judicial Court

Supreme Court: NLRB Lacked Authority for 600 Labor Decisions

Posted by Martha Zackin, Esq. on Jun 21, 2010 2:27:00 PM

(Martha J. Zackin, Esq., is Of Counsel to the law firm Mintz, Levin, Cohn, Ferris, Glovsky &  Popeo, P.C.)

On June 17, the United States Supreme Court ruled, in New Process Steel v. National Labor Relations Board, No. 08-1457, that the National Labor Relations Board ("NLRB" or the "Board") acted without statutory authority when it issued approximately 600 decisions during the period when vacancies left the Board with only two members. 

The impact of the decision will likely be narrow, affecting only the New Process Steel parties and the parties to the other 74 case currently pending before the Supreme Court and the Courts of Appeals that challenged the authority of the Board to act with only two members. 

By way of background, under the National Labor Relations Act ("NLRA"), the NLRB has the authority to resolve labor disputes.  The Board is comprised of five members, each of whom must be appointed by the president and confirmed by Congress. By statute, the Board may delegate its powers to any group of three or more members.  The statute also provides that three members of the Board constitute a quorum, except that when the Board's powers have been delegated to a group of three or more members, two members may constitute a quorum.

In late 2007, the Board had only four members, two of whose terms were about to expire. Concerned that there might be vacancies for an extended period, the Board delegated its authority to three members.  The action, the Board believed, would permit the remaining two members to exercise the full powers of the Board because those two members would constitute a quorum of the three-member group. 

The vacancies remained unfilled for 27 months and from January 2008 until March 2010, the group of two issued decisions in almost 600 cases.  In two of these cases the NLRB sustained two unfair labor practice complaints against New Process Steel ("NPS").  NPS appealed both orders, challenging the authority of the two-member Board to issue the orders.  The Court of Appeals sustained the authority of the Board.

The Supreme Court ruled that the NLRA required at least a three-member Board, and, therefore, the two-member Board's rulings against NPS were invalid. The Supreme Court's decision will not only impact the New Process Steel parties, but also  the parties to the seventy-four cases now on appeal that have challenged the authority of the two-member Board.  The NLRB issued a press release saying it expects those cases to be returned to the NLRB to be adjudicated by a proper quorum of the Board, which now has four members as two of the vacancies have been filled.

But what of the more than 500 other cases, which were improperly adjudicated but not appealed?  Typically, final judgments are just that- final.  However, it may be argued that principles of finality do not apply where the judgment was issued by a body that lacked statutory authority to decide the case in the first instance. 

In any event, the NLRB will be quite busy now and for some time to come - perhaps even too busy to work towards implementing the Employee Free Choice Act by NLRB fiat, as has been advocated by new Board member Craig Becker.

Topics: Employment Law, U.S. Supreme Court, NLRB

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