Thursday, April 25, 2019

Supreme Court signs off on death by a thousand cuts

Lingchi was a form of torture and execution used in China from roughly 900 BC until China banned in 1905. It translates variously as the slow process, the lingering death, or slow slicing. It's more commonly known as "death by a thousand cuts," in which the torturer uses a knife to methodically remove portions of the body over an extended period of time, ultimately resulting in death.

Yesterday, in Lamps Plus v. Varela, the Supreme Court held that parties to an arbitration agreement cannot be required to arbitrate their claims as a class action unless they specifically agreed to do so in the arbitration agreement.

Management-side employment lawyers will herald this decision, along with Epic Systems v. Lewis (which held that agreements that compel employees to waive their rights to file or participate in class or collective actions and individually arbitrate their claims are valid under Section 7 of the National Labor Relations Act), as the death knell for wage/hour and other employment law class and collective actions. And, they are probably right. But, is this result a good result for employers?

I've previously discussed by distaste for arbitration as a forum for employment disputes. In sum: I do not think it's the panacea many employers believe it to be; employers should instead consider jury trial waivers to cut the risk of runaway juries, and contractually shortened statutes of limitations to otherwise limit risk.

Also, however, consider whether by preventing employees from litigating claims as class or collective actions you are inflicting lingchi on your business. Yes, class actions are large, and unwieldy, and expensive. But they also offer the opportunity for finality. You will resolve the issue in one lone (albeit large) case. Alternatively, if you require employees to litigate their wage/hour claims (for example) in individual lawsuits, instead of facing one claim, you will expose your business to dozens, or hundreds, or thousands of individual claims, each carrying with it a small amount of damages for unpaid wages, and a large exposure for an attorneys' fee award in each case. And while attorneys' fees are the number one risk factor for employers in wage/hour class and collective actions, would you rather expose yourself to one potential award of fees, or dozens, hundreds, or thousands? And, don't forget about arbitration fees, which, often times, employers are contractually obligated to pay in full.

So, before you jump on the class-action waiver bandwagon, talk to your employment lawyer and consider whether it's really in the best interest of your business. Do you want one larger cut, or thousands of smaller ones?

* Photo by Ashim D’Silva on Unsplash