In a 5–4 ruling handed down on Monday, the US Supreme Court ruled that organizations can legally require their employees to sign arbitration agreements in their work contracts and waive their right to resolve labor disputes through class-action lawsuits. The court split on ideological lines, with the five conservative justices voting to allow class action wavers and the liberal minority dissenting, the New York Times reported:
Writing for the majority, Justice Neil M. Gorsuch said the court’s conclusion was dictated by a federal law favoring arbitration and the court’s precedents. If workers were allowed to band together to press their claims, he wrote, “the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace.”
Justice Ruth Bader Ginsburg read her dissent from the bench, a sign of profound disagreement. In her written dissent, she called the majority opinion “egregiously wrong.” In her oral statement, she said the upshot of the decision “will be huge under-enforcement of federal and state statutes designed to advance the well being of vulnerable workers.” Justice Ginsburg called on Congress to address the matter.
The ruling, which the Times adds could affect some 25 million employment contracts, comes nearly a year and a half after the high court agreed to hear a group of cases on the legality of arbitration clauses and class action waivers. It was not unexpected, given the court’s conservative majority and the inclinations Gorsuch and his right-leaning colleagues have shown in other labor-related cases.
Business groups and employer-side attorneys cheered the ruling, which they say will free companies from burdensome litigation and allow disputes to be resolved through the cheaper and speedier process of arbitration. Labor rights advocates expressed dismay, however, warning that it would result in a rollback of employees’ fundamental rights and would prove particularly disastrous in discrimination and harassment cases. In a Times op-ed, Terri Gerstein and Sharon Block, of Harvard Law School’s Labor and Worklife Program, criticize the ruling for taking away a key safety net for employees:
The freelance hiring and management platforms Fiverr and AND CO have teamed up to create a new standardized work contract for freelancers that they are calling the first of its kind to include built-in protections against sexual harassment, Ephrat Livni reported at Quartz on Wednesday:
The new contract explicitly states that harassment by clients or staff isn’t tolerated, which may seem obvious but isn’t a fundamental aspect of most freelance arrangements. The agreement also gives freelancers the right to terminate an arrangement if offending behavior continues after the client has been informed of it. A contractor who quits on these grounds must then be paid in full for the project or the month—depending on the terms of their arrangement with the client—and must receive that pay within 30 days.
Sounds decent, right? Well, it is. But it’s also not much, as the companies also admit. “We recognize this is a small step in a much longer journey, but it’s an important one,” they state.
After all, a big problem with harassment in the workplace is that it’s awkward to report in the first place, and all the more so when the perpetrator of the abuse is responsible for the paychecks. Despite the new clauses, contractors who are harassed by the clients who hired them aren’t very likely to feel comfortable demanding that abuses stop—not if they want to work for that client again. And few freelancers who are in an office on a contract basis will find it easy to complain about abusive staff with permanent positions.
These caveats highlight one of the fundamental perils of a labor market in which more workers are self-employed and fewer enjoy the protections that come with a formal employment relationship with a single organization. The #MeToo movement has sparked a long-overdue conversation about sexual harassment and misconduct in US workplaces, which has sent organizations and governments scrambling to find better ways to protect workers against these crimes. Most of these laws and policies, however, focus on employees, with independent contractors getting less robust protection, if indeed they have any at all.
Writing these protections into contracts is one way to help address the abuse of freelancers; another is to enshrine them explicitly in the law.
New data from the UK’s Office for National Statistics show that the number of people working on zero-hours contracts throughout the country had increased by about 100,000 last year, Jo Faragher reported at Personnel Today earlier this week:
ONS reported that in the year to November 2017, there were 1.8 million contracts that did not guarantee a minimum number of hours, compared to 1.7 million in the year to November 2016. However, in terms of labour market share, zero hours arrangements still made up 6% of all contracts.
These controversial contracts, which do not guarantee employees work in any given pay period but obligate them to be on call for shifts that may or may not be assigned to them, have been the subject of intensely negative press coverage and mounting regulatory scrutiny over the past two years. Ireland has moved to regulate them nearly out of existence, while a Scottish MP has introduced legislation to ban them in the UK. The ONS’s last report on zero-hours contracts, issued last September, found that they were on a steep decline.
So what gives? Fortunately, Faragher reports, the office’s latest data almost certainly doesn’t indicate a reversal of the trend:
Washington Governor Jay Inslee on Wednesday signed a suite of legislation that will make it illegal for employers to use non-disclosure agreements and other contractual provisions to stop employees from reporting or discussing sexual harassment and assault in the workplace, The Hill reports:
One of the bills Inslee signed would prohibit employers from requiring nondisclosure agreements that would stop individuals from speaking out about sexual assault and harassment in the workplace. Another will prevent nondisclosure agreements from barring employee testimony in civil lawsuits relating to assault or harassment claims. That bill also allows those bringing the suits to conduct discovery on previous harassment claims.
Inslee also signed a new law voiding employment contracts and arbitration agreements that preclude an employee from filing assault or harassment complaints outside their companies.
Washington is the first state to take this kind of action in the wake of the #MeToo movement that revealed the still-high prevalence of sexual harassment and misconduct in the American workplace, including the statehouses in Olympia and other capitals.
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Two bills that would have all but banned the use of non-compete agreements by employers in Washington State did not come up for a vote before a February 14 deadline for moving forward in the current legislative session, GeekWire’s Monica Nickelsburg reports:
The House bill would have prohibited non-compete agreements for employees working fewer than 40 hours per week or earning less than 200 percent of the minimum wage. Independent contractors and employees taking a second job would have also been protected from non-competes.
The Senate bill is broader. It would have prohibited “any contract that restrains a person from engaging in a lawful profession, trade, or business of any kind,” except for an employee who sells all of his or her operating assets or ownership interest in a business entity to a buyer operating a “like business.” Exemptions would also have been made for partners who disassociate from a business partnership.
This is the third legislative session in which Washington lawmakers have tried and failed to pass restrictions on non-competes. Proponents of this legislation say it would help make the state more competitive with California, where the use of non-compete clauses is almost always prohibited, as a magnet for talent and business investment, particularly in the tech sector. However, Michael Schutzler, CEO of the Washington Technology Industry Association, tells GeekWire that this comparison is misleading and that it was wise for the legislature not to rush new legislation in this regard.
In 2016, Massachusetts state lawmakers failed to reach a compromise over a bill that would strictly limit companies’ ability to enforce non-compete clauses in employees’ contracts, slowing the momentum of a trend among states to restrict the use of these agreements in roles where they were unnecessary or would overly limit employees’ future career prospects. The bill was widely expected to be revisited in the state’s next legislative session; sure enough, it has, and members of the Massachusetts House and Senate are now close to reaching a deal on a bill that satisfies both houses’ concerns, Jon Chesto reports at the Boston Globe:
There are still some issues to be worked out between House and Senate negotiators. The legislation will most likely include noncontroversial elements such as bans on using noncompetes for lower-paid hourly workers, such as camp counselors and sub-shop employees. But the two sides have yet to agree on how long noncompete contracts can remain in force. In 2016, the House leadership supported up to 12 months, while the Senate backed a three-month limit. Another potential sticking point: the wording for how departing employees should receive payments, known as “garden leave,” while their noncompetes are in effect.
Advocates for curbing the use of non-competes in Massachusetts say it harms the state’s ability to leverage its highly educated workforce and become a full-fledged tech startup hub like California, which is one of the few states where the use of such clauses is almost always prohibited and where courts generally have refused to recognize them. Most other states have laws that limit the use of non-competes to the protection of trade secrets and other confidential information, but impose a varied range of standards for determining whether an agreement is enforceable.
Lawmakers in three other states—New Hampshire, Pennsylvania, and Vermont—are also considering new restrictions this year, Jackson Lewis attorneys Daniel P. Schwarz, Martha Van Oot, Erik J. Winton and Colin A. Thakkar write at SHRM:
The Ending Forced Arbitration of Sexual Harassment Act of 2017, a bipartisan bill recently introduced in the Senate by Democrat Kirsten Gillibrand of New York and Republican Lindsay Graham of South Carolina, would as its title suggests would bar employers from enforcing mandatory arbitration clauses on employees who come forward with sexual harassment claims. These controversial clauses in employment contracts, which require employees to resolve disputes with their employer in arbitration rather than in court, have been criticized as an impediment to victims speaking out and even more disconcertingly, as tools for silencing victims and letting harassers avoid accountability.
Microsoft on Tuesday publicly announced that it was supporting the bill, with President and Chief Legal Officer Brad Smith writing at the company’s blog:
Over the past couple of weeks, we’ve learned more about the provisions of this bill and the issues it will address. When I recently met with Senator Graham on Capitol Hill to discuss cybersecurity and immigration issues, he followed those topics with a compelling appeal that we consider this new legislation. As he pointed out, as many as 60 million Americans today have no legal ability to bring a sexual harassment claim in court because they work under an employment contract that requires that all such claims be subject exclusively to private arbitration.
Microsoft is also changing its own arbitration policies in line with it support for this legislation, Smith added, acknowledging that “we have contractual clauses requiring pre-dispute arbitration for harassment claims in employment agreements for a small segment of our employee population” and announcing that effective immediately, these clauses are waived.
As Smith notes, the tech giant has been studying the bill for several weeks, but the announcement happens to come in the wake of new revelations about past allegations of sexual harassment and assault at Microsoft and how the company handled them, which were reported at Bloomberg last week after they came to light in files unsealed in an ongoing class-action lawsuit alleging that Microsoft discriminates against women.