California v. the Supreme Court’s Reversion on labor rights




On May 21, 2018, the US Supreme Court overruled federal labor rules and reverted to the 1925 Federal Arbitration Act norm in Epic Systems Corp. v. Lewis.   This ruling reversed federal rules enabling workers to band together and challenge various employer abuses through ‘class action’ lawsuits, even if their employment contract includes an arbitration clause that prohibits them from participating in such class actions.

Let’s consider the Orange County of 1925 for a spell:

  • La Habra was incorporated, with a population around 3000, adopting a name taken from the Rancho Cañada de La Habra, lands granted to Don Mariano Reyes Roldan in the 1830s, then purchased by a stream of farming settlers, shepherds, and later, the site where a certain young lawyer set up his first law office on an epic presidential rise and fall in 1938;
  • the Federal Arbitration Act was issued in DC, shifting the rights and obligations for any OC employers big enough to afford to hire a lawyer to draft a contract containing an arbitration clause (there really weren’t all that many, but new law firms would start up to meet that need…)
  • a link of the Pacific Coast Highway was under construction, which would extend all the way from Newport Beach to Huntington Beach by 1926.

Folks looking to this era of history may start with works by Steinbeck or Upton Sinclair, survey how police backed up employers during strikes, or called out the National Guardsmen should police fail.  Turning California ‘golden’ – for real, for most of us –  took decades of hard work, work that remains in progress, but when it succeeds, it does so largely because Californians created means to counter kleptocrats and rein them in.

Under the old rules, if an employer stole $500 from 100 employees, or $50 from 1000 employees, each employee could be required to fight that claim of theft separately.  In 1925, with so few lawyers in California drafting contracts, and few employers actually having 100+ employees, employment arbitration in that form would have been relatively uncommon.  In 2018, with an abundance of contracts freely available, these clauses are pretty normal.  The effect is simple: every employee seeking to recover from an employer will have to face arbitration – if they win, they get the $50, or $500 they lost – and if they lost, they pay thousands for arbitration (and also may lose their jobs).  The old  ‘grin and bear it’ system rewarded the corrupt in their corruption – but most of that occurred outside of California, in older states where employers had a pool of counselors ready to help them get away with it.

The system was so egregiously unfair that come the ‘New Deal,’ and the Fair Labor Standards Act of 1938,  America set up mechanisms to resolve the problem – setting standards for wages, curtailing child labor, and empowering unions.  We set up rules to ensure that collections of workers could protect themselves from unscrupulous employers, either through unions, or in some cases, collective legal actions.

The outcome for California post 1938?  We grew even faster, richer, and proceeded to fill in gaps overlooked in the federal system.  These days, we’re looking at revising the ‘arbitration’ term ourselves: AB-3080 , which would ban compulsory arbitration terms in several contexts (sexual harassment, or from any procedure that would involve enforcing the Fair Employment and Housing Act rules).  This is in keeping with our structure, and it’s worked relatively well: California’s prosperity outpaced every state in the country, no matter how ‘business friendly’ they made themselves.

California has better rules than the new federal order: a worker here may not get a huge salary, but will at least get what they were promised.  The new Supreme Court rules mean that in much of America, kleptocratic employers may resume tricks used to gouge workers, but with a few new elected officers coming up in 2018, it is quite possible that the Epic System judgment can be overruled by a simple legislative shift: if it happens, California will once again lead the way.

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