CHICAGO – Workplace lawsuits targeting employers' pay practices have been on the rise for years, some yielding massive settlements, but a major Supreme Court decision expected this year could reverse that trend if the justices allow companies to use arbitration agreements that prohibit class actions.
The Supreme Court recently accepted for review three cases that have diverged on the legality of workplace arbitration agreements, which force employees to resolve grievances through an arbitrator and waive their rights to participate in class-action lawsuits.
Arbitration agreements — which consumers commonly sign, often without realizing it, when they start a credit card or cellphone contract — are becoming increasingly popular among employers who want to avoid costly and lengthy battles with their workers in court.
The court's review comes as private workplace lawsuits are expected to rise under President Donald Trump. Gerald Maatman, a partner in the Chicago office of Seyfarth Shaw who represents management in workplace lawsuits, said that while workplace agencies during the Obama years aggressively investigated and sued employers for violations, Republican administrations historically have backed off enforcement, and plaintiffs' attorneys usually end up filing more lawsuits on behalf of workers to fill the void.
Curbing class actions, a key tool workers have to fight violations, because individual claims would fetch too paltry a sum to be worth a lawyer's time, could alter that landscape amid a boom in litigation involving pay.
"Potentially, if arbitration agreements are valid for wage disputes, that could very much drive down the number of lawsuits filed," said James Bormes, a Chicago attorney who represents employees in workplace suits. That's worrisome, he said, because without the threat of class actions, "I think it will give a green light to some companies to commit wage violations."
But to David Ritter, a partner in the Chicago office of Barnes & Thornburg who represents management, arbitration is a preferred alternative to lawsuits that are "adversarial from the start" and hammer good employers who try to comply with laws but sometimes make mistakes.
Last year was a banner year for pricey settlements for wage-and-hour class-action lawsuits, the hottest segment of workplace litigation, in part because they are the easiest to bring as class actions. Wage-and-hour cases involve overtime and minimum wage violations and other laws covered by the Fair Labor Standards Act.
The value of the top 10 wage-and-hour class-action settlements surged to $695.5 million last year, from $436.6 million in 2015 and $215.3 million the year before, according to an annual report from Seyfarth Shaw. That's in contrast to other categories of workplace litigation, such as cases involving discrimination and pension plans, which saw settlement values decline last year after reaching all-time highs in 2014 and 2015.
"If you're an employer, the No. 1 risk is how you pay people," Maatman said.
To Bormes, the prevalence of the suits suggests many companies make a business decision to not pay employees properly and deal with consequences should they come.
But to Ritter, the management-side lawyer, the thirst for wage-and-hour litigation has more to do with lawyers eyeing a potential payout.
