The Supreme Court’s recent Murphy Oil decision regarding class action waivers is a disaster for American workers and those that believe in good corporate governance. Last week a closely divided court ruled that companies can force employees to waive their right to sue for employment law violations. Yes, as a condition of an employment your boss can make you waive your right to sue or participate in a class action. (Read more about the decision on our FLSA Employment Law information page.)
In 2012, the National Labor Relations Board (NLRB) took the position that employers couldn’t force workers to waive certain fundamental rights including the right to seek judicial redress of employment law violations… violations that include minimum wages, pay for all time worked or overtime pay.
Two federal appeals courts quickly backed the NLRB. The 7th Circuit (covering three Midwest states) and the 9th Circuit (9 western states including California, Alaska and Hawaii) said the National Labor Relations Act precluded lawsuit waiver clauses.
Passed in 1935 during the Great Depression, the Act prohibits a wide variety of management practices that hurt American workers.
Despite a large number of federal courts supporting the NLRB’s interpretation of the Act, the 5th Circuit Court of Appeals ruled in favor of employers and the lawsuit / class action waivers.
That split among courts made the issue ripe for review by the U.S. Supreme Court. That review happened on May 21st, 2018. Five justices lead by conservative Justice Neal Gorsuch ruled that the class action and lawsuit waivers were legal. That means that employers can force workers as a condition of employment to give up these fundamental rights.
As a practical matter, the Supreme Court has closed the courthouse doors to American workers. It is simply not economical for lawyers to take single cases, especially if they must go through expensive arbitration. That means workers denied proper pay are going to have to handle their own case without a lawyer.
We have no doubt that many either won’t bother or will lose.
In a perfect world, employers would clean up their act and insure that all workers are properly paid. We expect the opposite, however.
With the NLRB and lawyers effectively neutralized, workers that are subject to an arbitration provision or class action waivers are on their own. No one is left to protect their rights.
And so what are employers saying? One prominent employment law firm that represents employers (not workers) had this to say,
“In light of the Supreme Court’s ruling, employers should revisit their employment agreements and consider including arbitration provisions waiving class and collective actions, particularly when assessing ways to minimize significant liability for wage and hour claims. Given the employee-focused framework of the FLSA, the minimal pleading threshold for bringing suit, the potential for large attorney fee awards, and the abundance of collective action proceedings generated by the FLSA, forcing individual arbitrations on these issues could provide a means of reducing liability exposure and defense costs.”
You read that correctly, the way to “minimize liability” isn’t to follow the law. Instead, minimizing liability is making sure your workers can’t sue!
We don’t blame the defense law firms for giving this advice. The push to curtail Fair Labor Standards Act (FLSA) lawsuits comes from the U.S. Chamber.
The Chamber has long been working to dilute both the FLSA and the National Labor Relation Act. A Chamber report had lots to say about the Supreme Court’ decision to take up the issue, and in particular the NLRB: “It has overturned numerous longstanding precedents, challenged many common sense employment policies, and created a great deal of uncertainty for both workers and employers.”
Murphy Oil – How Did We Get Here?
Last week’s landmark Supreme Court decision has a humble beginning. Murphy Oil Company operates gas stations in Wal Mart parking lots.
In November 2008, Sheila Hobson applied to work as an attendant at a Murphy Oil station in Calera, Alabama. As a condition of employment, Hobson had to agree to a provision waiving her right to pursue employment-related claims through a class or collective action in any forum and, instead, compelled her to pursue claims solely through individual arbitration.
In June of 2010, Sheila joined up with three other women who worked as cashiers or assistant managers for Murphy Oil. The group said they were required to perform fuel surveys before and after their shift. A fuel survey involves checking the prices of fuel at other area gas stations. Because they must perform these surveys before and after their shift, they were not paid for their time.
The women sued. The issue soon became whether the women even had the right to sue. What started out as a case about unpaid work time soon became a critical legal issue, can you be forced to give up your right to sue in order to get hired?
Ultimately the NLRB would take up the cause for Sheila and her co-workers.
While the case was pending before the U.S. Supreme Court, the Justice Department engaged in an extremely rare move and took the side of the employer even though another federal agency – the NLRB – had sided with the employees.
Class Action Waivers, the FLSA and the Aftermath
Can all of this be fixed? It can but at this point it will take Congress to clarify the law and make it clear that greedy businesses can’t take away fundamental rights of workers.
We expect a wave of new employment agreements to sweep the country. HR departments are already busy rewording their contracts.
There is still time, however, to bring actions for violations of federal minimum wage laws and overtime rules too.
We urge anyone who believes they are not being properly paid to contact us immediately. Time is running out. Under existing FLSA rules, companies can be held responsible for up to 3 years of wages. (More in some states such as California.)
For more information visit our FLSA FAQ page or contact us directly. Attorney Brian Mahany can be reached online, by email or by phone (202) 800-9791.
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