Briana Hauser

Supreme Court to Determine the Future of Employee Arbitration Agreements

Top tech companies, including Facebook, Google, Oracle, Hewlett-Packard, and Intel, use arbitration clauses to bind employees to resolve workplace disputes through individual arbitration.1 On October 2, the Supreme Court heard oral arguments in N.L.R.B. v. Murphy Oil USA, Inc.,2 a case that could affect the rights of twenty-five million U.S. employees with arbitration agreements,3 and eighty percent of tech companies, all of which currently compel arbitration.4

Murphy Oil is a consolidation of three cases, each brought by employees with arbitration agreements as class action or collection action.5 The question in this case is whether the National Labor Relations Act (NLRA), which provides for employees’ right to “concerted activities,”6 supersedes the Federal Arbitration Act (FAA), which provides that arbitration agreements “shall be valid, irrevocable, and enforceable.”7

In their brief to the Supreme Court, employers argue that the FAA “unambiguously mandates” enforcement of class waivers, which can only be overridden by a “contrary congressional command.”8 The NLRA, they contend, does not contain such a command.9

By contrast, the National Labor Relations Board (NLRB) and employees argue that the FAA intended to put arbitration agreements on “equal footing” with regular contracts, not to provide them with greater protection, as employers would prefer.10 Because these agreements violate the NLRA by precluding “collective pursuit of legal claims,” they are illegal and unenforceable.11

Employers prefer individual arbitration because damages are significantly less.12 Individual arbitration also allows employers to keep disputes out of public view, putting employees at a substantial disadvantage.

For employees, individual arbitration generally means lesser bargaining power, less effective remedies, and lack of incentive for employers to improve workplace conditions.13 Under arbitration clauses, employees are almost always prohibited from discussing their experience,14 meaning they are unable to warn other employees or to hold the employer accountable. The amount at issue in individual disputes is often too small to even warrant pursuing arbitration,15 whereas collective action allows employees to combine forces and resources.16 When employees do proceed through individual arbitration, they have lower success rates and award amounts compared to litigation,17 and have limited discovery and appellate rights.18

In February 2017, forced arbitration gained public attention when Susan Fowler, a former Uber engineer, alleged in a blog post that she had experienced persistent sexual harassment, retaliation, and gender discrimination while at Uber.19 Fowler could not have brought a claim in court because Uber had required her to sign an arbitration agreement and class action waiver when she was hired.20 Her post, however, sparked an investigation by former Attorney General Eric Holder, which exposed Uber’s adverse culture and led to the ultimate resignation of CEO Travis Kalanick.21 Fowler’s attorneys even filed an amicus brief for respondents NLRB and employees in Murphy Oil, arguing that employers like Uber require class action waivers “to limit or eliminate the legal risk associated with systemic—and potentially or certainly illegal—employment practices.”22

Other cases involving Uber, Twitter, and Google illustrate the tech industry’s interest in arbitration and the outcome of Murphy Oil. Uber is currently facing a class action brought by 240,000 California drivers with arbitration agreements who say Uber owes them unpaid wages.23 The case has been withdrawn from submission to the Ninth Circuit, pending resolution of Murphy Oil.24

Twitter, too, makes its employees sign class-action waivers and is now facing a lawsuit from current and former female employees alleging sex discrimination, retaliation, and wrongful termination.25

Google is the most recent tech company to face criticism from former female employees for alleged “systemic gender discrimination.”26 Though the employees did not sign an arbitration agreement restricting class action at the time of their hiring, Google has since changed its employment agreement, meaning that newer employees could be precluded from joining the suit if arbitration agreements are upheld.27

Many believe that the Court’s conservative majority is likely to side in favor of employers in Murphy Oil.28 If so, the eighty percent of tech companies who compel arbitration would be granted permission to continue to do so, notwithstanding the NLRA. Employees, however, will not fare so well. Their wage claims, sexual assault claims, civil rights claims, and discrimination claims will remain silenced in forced private arbitration.29

Although there has recently been legislation proposed targeting forced arbitration,30 the Court’s decision in Murphy Oil will nonetheless change the future of employee-employer relationships, and have a particularly important impact on the future of the tech industry.

GLTR Staff Member; Georgetown Law, J.D. expected 2019; The Pennsylvania State University, B.S. 2014. ©2017, Briana Hauser.