Can my employer make me waive my right to participate in a class or collective action?

Unfortunately, it’s looking like they may. The U.S. Supreme Court ruled on Wednesday that contracts that mandate that a consumer submit any and all claims to arbitration and waive his or her right to participate in a class action are enforceable.

In AT&T Mobility LLC v. Concepcion, two consumers sued AT&T when they had to pay $30 in tax for a phone that was advertised as “free.” They wished to bring their claim in court as participants in a class action. However, the contract that they had signed with AT&T mandated that all claims would be submitted to arbitration and that they could not join a class action against the company. The Court rejected the plaintiffs argument that a prohibition on class actions was illegal.

There are two problems with this ruling: First, there is a fundamental inequity in bargaining power between companies and consumers, and employers and employees. The phone companies hands you a contract, and you either sign it or do not get a phone. There is no opportunity to say, hey, I do not want this arbitration provision in this contract, please remove it and we’ll negotiate a deal.

Second, plaintiffs who have small claims will not be able to enforce them individually if the cost of hiring an attorney outweighs the value of the claim. Class actions serve an important purpose, which is to allow employees and consumers to pool their resources to hire lawyers and pay court costs, etc. It is an effective means for individuals to challenge unfair corporate practices. Without them, large companies will violate laws without fear of repercussions.

This ruling may be applied to employees. Already, many employers are including similar class action prohibitions in their handbooks and arbitration policies. Attorney Hayber wrote about this issue in his blog. This Supreme Court ruling is very bad for individuals. Hopefully, Congress will act to make these contracts unenforceable.