Sills lawyer: Supreme Court ruling in employer-employee litigation is ‘major victory’ for local businesses

A U.S. Supreme Court decision this week dealing with employee-employer litigation has some clear winners and losers in the eyes of New Jersey legal experts.

The Supreme Court on Monday decided in a 5-4 majority — led by newly appointed Justice Neil Gorsuch — that one long-existing federal labor act trumped another and, as a result, employees who sign employment agreements to arbitrate legal claims have to do it individually.

It was a “major victory” for local businesses, according to David I. Rosen, who represents management at businesses in legal matters as chair of the employment and labor practice group at Sills Cummis & Gross P.C.

“What it means practically for employers in New Jersey and elsewhere is that arbitration agreements that they enter into with employees can effectively waive the employee’s rights to bring class action suits against employers and can require them to arbitrate individual (legal) claims instead of group claims,” he said. “You’re going to see more employers asking judges to bar class actions if employees ignore the agreements and simply start their lawsuits.”

The upshot requires a less lengthy explanation.

“I expect this to save businesses from litigation expenses and adverse publicity,” Rosen said.

That doesn’t mean class action lawsuits will now become a thing of the past. Where there are no arbitration agreements in place with the proper language, there will still be collective actions, Rosen explained.

It’s not uncommon, however, for the signing of such contracts to be made a condition of employment. In situations like that, Adam Kleinfeldt, a partner at Deutsch Atkins P.C., argues that employees often don’t know what they’re agreeing to. He said a sizable percentage of employees, without attorneys to consult, don’t understand the repercussions of every paper they’re signing on the first day of a job.

“And, so, employers who are sophisticated can prevent employees from getting their right to have a jury of their peers hear legitimate employment disputes,” he said. “It’s only later employees find this out.”

Kleinfeldt comes to this issue from the perspective of representing workers’ interests. He deals with employment litigation such as discrimination, retaliation and whistle blowing.

Given that, he’s troubled by the Supreme Court’s decision.

“Millions of workers will be impacted by this,” he said. “The threat of a jury responding to employer conduct has been removed. I believe this undermines the jury system overall.”

Similar to what was expressed by Supreme Court Justice Ruth Bader Ginsburg, who delivered the dissenting opinion on this matter, Kleinfeldt considers this a setback after decades of federal and state policy aimed to create an equal playing field for employers and employees.

“I think Ginsberg gets it right,” Kleinfeldt said. “I agree that the result will be a negative effect on statutes on the federal and state level that are designed to advance the well-being of vulnerable workers. These workers are powerless against the actions of employers, and access to a jury trial was the one of the only powers they had.”

New Jersey has had its own set of high court opinions pertaining to when someone can voluntarily waive a right to a jury trial as a matter of contract law. The state’s Supreme Court has held arbitration agreements to a strict standard in terms of the language in the contract — making that the deciding factor of arbitration’s enforceability.

Each state has its own approach to how arbitration agreements are enforced. In most cases, it seems the federal court’s decision will take precedence.

“The Supreme Court is enforcing a federal statute, and, if you have an employment agreement, it is governed by federal law,” Rosen said. “So, if the Supreme Court is saying you can enforce arbitration agreements against employees, it will in all likelihood undercut state court decisions that suggest otherwise.”

What it doesn’t undercut, Rosen clarified, is an employee’s right to litigation involving disputes over pay, benefits and other matters. His view is that there are a lot of positives in the strengthening of the use of an arbitrator to resolve these conflicts.

“An arbitrator is not going to be swayed by emotion, but instead just listen to the facts to make a decision,” he said, adding that the process resolves disputes “quickly and efficiently.”

At the end of the day, no business wants to get sued — especially in large class action lawsuits.

“It’s bad for publicity, it’s expensive to defend, and — to top it all off — it can be at the whim of a jury deciding whether they engaged in wrongdoing,” Rosen said. “So, for businesses here, this is a sigh of relief.”