A federal judge who lamented that precedent required him to send a wage-and-hour case to arbitration isn’t alone in criticizing the practice while enforcing it, but the legislative fix he urged looks unlikely.
Workers often sign arbitration agreements when they start a new job, which makes it difficult if not impossible for them to later pursue wage-related claims in court. US Supreme Court precedent consigning those cases to arbitration “effectively eviscerates years of hard-fought Congressional protections for American workers,” Judge William G. Young said, bemoaning the outcome in a retail merchandiser’s case even as he faithfully applied the high court’s rulings.
The Supreme Court expanded the reach of one Federal Arbitration Act carveout in Southwest Airlines Co. v. Saxon in 2022. The justices are set to take another look at who falls under the transportation worker exemption after granting bakery distribution workers’ petition for review in Bissonnette v. LePage Bakeries Park St. LLC in September.
Parties fight over the enforcement of arbitration agreements in thousands of cases each year, and these issues can pop up in wage suits against any employer. Many recent disputes involve gig-economy stalwarts such as
Imre Szalai, a Loyola University New Orleans law professor who studies the Federal Arbitration Act, estimated he sees 10 to 20 reported opinions in arbitration enforcement cases every day.
Calls to action such as the one Young included in Fraga v. Premium Retail Services Inc., which the US District Court for the District of Massachusetts issued Dec. 5, are rarer.
“I typically see an expression of judicial frustration about once or twice per year,” Szalai said.
Other Judicial Criticism
Young, whom President Ronald Reagan nominated to the bench in 1985, previously criticized the FAA as being “fashioned by corporate America into one of its most potent weapons” against workers. “Small wonder, then, that there is an explosion of litigation by workers seeking to bring themselves within the FAA’s exemption” for transportation workers, Young—who took senior status, a form of semi-retirement, in 2021—said in a 2022 ruling in Sara Fraga’s would-be class wage case.
But even jurists who don’t object to the FAA itself have raised concerns about where things stand with the transportation worker exemption. Judge Paul B. Matey of the US Court of Appeals for the Third Circuit has also “lamented the current state of affairs,” said Tamar Meshel, a University of Alberta law professor who formerly practiced international commercial arbitration.
Matey in a 2021 Third Circuit case involving the FAA and state arbitration law concurred with his own opinion for the panel to discuss the “uncertainty” over when exemptions apply. A “tug-of-war” in federal courts over the FAA’s reach has replaced the law’s text with “presumptions that encourage unpredictability and foster rising costs,” he said at the time.
“There are also examples of judges forcefully objecting to FAA precedent in other contexts,” Meshel said. She pointed to an opinion from Judge Kevin C. Newsom of the Eleventh Circuit dealing with rental car damage. Newsom, who like Matey was nominated to the bench by President Donald Trump, similarly concurred with the panel opinion he wrote to express skepticism over precedent requiring judges to broadly construe arbitration provisions.
“These statements of concern in judicial opinions are a way in which judges can in effect inform others or suggest reforms that the other political branches can take up,” Szalai said.
Arbitration’s ‘Sad Irony’
Arbitration is often touted as a cheaper and faster way for parties to sort out their differences, but that’s “simply a ‘myth,’” Young said in Fraga. The “sad irony” is that this particular wage case “would long since have been resolved” if not for the arbitration agreement and more than two years of fighting over its enforcement, he added.
“There’s no doubt that lengthy pre-arbitration litigation frustrates the potential benefits of arbitration in terms of cost and speed,” but that has “nothing to do with the employment arbitration process itself,” Meshel said. The lack of clear guidance on who counts as a transportation worker has “led to inconsistent interpretations by the lower courts that encourage litigation over the application of the exemption,” she said.
When parties engage in court battles over the use of arbitration, they’re “fighting about where the fight will occur,” which isn’t an efficient way to handle things, Szalai said. “Part of the problem is that the FAA is a simple, concise statute, adopted for more limited uses” nearly one hundred years ago. Judges have had to “fill in the gaps” as the use of arbitration expanded, he added.
Sometimes this pre-merits litigation “is not just the main event, it can become the only event,” Szalai said, with some plaintiffs abandoning their claims rather than pursue them in arbitration after a case is kicked out of court.
New Law Unlikely
“Congress is not impotent” when it comes to ensuring workers have access to courts for their employment-related claims, Young said. He noted that bipartisan Congressional majority already took action to end forced arbitration in cases of sexual harassment. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act passed in March 2022, ahead of midterm elections that flipped control of the House of Representatives from Democrats to Republicans.
The new law was the “first substantive amendment limiting the scope of the FAA in almost a century, but it was not the first attempt to do so,” Meshel said.
Lawmakers have proposed broader arbitration reforms “in almost every Congress for several years,” Szalai said. But all of the other bills “died out in committee,” he added.
One bill—the Forced Arbitration Injustice Repeal Act—has been introduced multiple times, most recently in April, but it “seems to have far less bipartisan support,” Meshel said. “Judging by history, this likely means that it will fail again,” she said.
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