The Supreme Court issued a monumental decision on Monday, ruling that employers can require their workers to sign arbitration agreements giving up their right to sue in court as a group. The decision in Epic Systems v. Lewis will make it harder for workers to band together as victims of wage theft and discrimination, and its effects will be felt in the workplace for years to come.
But for a few thousand current and former Chipotle workers, its effects may be felt immediately. Their case is a perfect example of how the Supreme Court’s ruling will benefit powerful companies at the expense of their employees, many of them working for low wages in industries like fast food.
Roughly 10,000 people who have worked for the burrito chain joined a 2014 lawsuit alleging the company systemically forced them to work “off the clock.” They claim that Chipotle gives its restaurants so little payroll that managers require employees to clock out and continue working or perform work before they clock in. They’re suing to recoup the money they claim Chipotle owes them for the uncompensated work.
But Chipotle has been arguing that 2,814 workers in that group do not have a valid claim because they signed class- and collective-action waivers when they accepted their jobs. Late last year, the company provided the court with a 62-page list of workers in the lawsuit who had supposedly signed away their rights and asked the judge to exclude them from the proceedings.
The judge has not ruled on that request yet. But thanks to Justice Neil Gorsuch and the rest of the Supreme Court’s conservative majority, Chipotle may soon get its wish. The judge in the case issued an order Wednesday inviting the parties to submit new briefs by June 6 in light of the Epic Systems ruling.
Their case is a perfect example of how the Supreme Court’s ruling will benefit powerful companies at the expense of their employees.
In the decision penned by Gorsuch, the court ruled that a worker’s right to join with other workers in mutual aid or protection under the National Labor Relations Act does not invalidate a class-action waiver the worker entered into. Justice Ruth Bader Ginsburg called the decision “egregiously wrong” in her dissent, arguing that the right to band together with other workers isn’t worth much if a worker must give up that right in order to get a job.
What the ruling most likely means for the Chipotle lawsuit is that roughly 7,000 workers will be able to pursue their claims collectively, while nearly 3,000 other workers will not. If the judge grants Chipotle’s request to exclude the latter, those workers would have to go individually and in private before an arbitrator. That is, if they happen to find a lawyer willing to take on a case with a claim that may be smaller than the cost of litigating it.
“This is almost a perfect social experiment, unfortunately,” said Moshe Marvit, a labor lawyer and fellow at the Century Foundation think tank.
All the plaintiffs did similar work for the same company and share the same grievance. The only difference is whether they had the misfortune to start working for Chipotle after the company implemented a mandatory arbitration agreement that includes a class-action waiver.
Chipotle declined to answer questions from HuffPost about why it instituted mandatory arbitration for its employees and how it makes sure that employees actually understand what they’re agreeing to. It also declined to answer questions about the underlying accusation of the case ― that it didn’t pay thousands of low-wage employees for work they performed.
Depositions in the lawsuit, however, help shed some light. According to court filings, Chipotle began requiring prospective employees to sign class-action waivers in August of 2014. If they didn’t sign, then they did not get their jobs. Since then, tens of thousands of workers have agreed to take any claims to arbitration as individuals.
The legal contracts were included in the onboarding materials that applicants go through online when they’ve been approved for a Chipotle job, according to the lawsuit. Its significance wouldn’t necessarily jump out at an applicant: Other documents in the bunch include the employee handbook and the manual on hand-washing, as well as nondisclosure and confidentiality agreements.
The Supreme Court decision is premised on the idea that the two parties are voluntarily entering into an agreement to take any workplace dispute to arbitration. But in a deposition, a Chipotle lawyer explained how voluntary these two-party contracts really are in practice:
“[I]f you choose not to agree to the arbitration agreement, for example, once you have been given notice and an opportunity to look at it, read it, ask any questions, download it, save it, whatever you want to do ― if you don’t, then you don’t have to be an employee,” said David Gottlieb, who’s listed on LinkedIn as the company’s director of compliance.
HuffPost readers: Are you part of an employment lawsuit that could be affected by the Supreme Court’s decision? Email us about it.
Most workers don’t closely read the pile of documents they have to go through when they’re accepting a job. And even if they did, any worker ― let alone one without a high level of education ― may not fully understand the implications of what they’re agreeing to. They may also be reluctant to ask questions and come off as a troublemaker or to hold up their own hiring once they’ve been offered a job.
Gottlieb testified that the onus was on the workers to understand what they’re signing.
“The obligation of the employee is to do whatever they need to understand what it is they are agreeing to,” Gottlieb said.
A lawyer for the plaintiffs asked Gottlieb what would happen if, say, a worker got to the arbitration agreement but couldn’t read it.
“[I]f you’ve gotten that far in the onboarding steps and you are only now discovering that you can’t understand what’s going on, boy. ... I’m wondering whether we should hire you because you should be asking for help earlier,” Gottlieb responded.
Gottlieb testified that workers agree to the arbitration agreement by checking an electronic box, rather than making an actual signature. He acknowledged that a worker could check the box without even opening the document.
“Yes, you could do that, but at your own peril,” he said.
Kent Williams, a lawyer for the plaintiffs, told HuffPost that his clients didn’t comprehend what they were agreeing to when they took their jobs with Chipotle.
“Virtually none of them remembers signing it. And by ‘signing it,’ I mean they click ‘agree,’” Williams said. ”They’re not reading this stuff, and they’re not understanding this stuff.”
As labor unions have lost much of their influence in the U.S., class-action lawsuits have become one of the main ways workers can band together with a grievance and take on the boss. Forcing workers into arbitration as individuals drains much of that collective power. That’s what Justice Stephen Breyer was getting at when he said during the Epic Systems oral arguments that the case strikes at “the entire heart of the New Deal.”
The obligation of the employee is to do whatever they need to to understand what it is they are agreeing to. David Gottlieb, Chipotle's director of compliance
If Chipotle workers are carved out of their lawsuit, they could still pursue their claims in arbitration. But there’s reason to think many of them would not.
Because these workers earn low wages, their individual claims are inherently small. According to Williams, the claims range anywhere from $50 to several thousand, depending on how long one worked at Chipotle. A lawyer might take that case on if there are enough plaintiffs in a class- or collective-action lawsuit, but an individual arbitration case may not be worth the lawyer’s time. As Ginsburg wrote in her dissent, “Expenses entailed in mounting individual claims will often far outweigh potential recoveries.”
A worker could still pursue the case without an attorney. But they probably don’t have a strong handle on the Fair Labor Standards Act and the ins and outs of minimum wage and overtime law, and they would be facing off against a lawyer for Chipotle, a company with about $4 billion in annual revenue. And while they may be comfortable joining a large lawsuit with other colleagues, many would no doubt shy away from standing up individually, for fear of being seen as an agitator.
In this particular case, the lawyers representing workers in the large collective action might consider representing workers who are forced individually into arbitration, if only because they already built the case and have a deep understanding of the claims. Yet Chipotle is fighting in court to prevent that from happening.
The company argued that the plaintiffs’ lawyers had no right to even inform workers of the wage theft lawsuit if those workers signed arbitration agreements. Chipotle considered that “an unequivocal invitation from Plaintiffs’ Counsel … to breach [the workers’] contract with Chipotle.” The company went a step further, asking that the plaintiffs’ lawyers be barred from representing any of those workers in arbitration proceedings ― which, in theory, would force the workers to find new counsel unfamiliar with their case.
“Plaintiffs’ Counsel should not be permitted to capitalize on this process for their personal financial benefit or additional leverage in this case,” the company argued.
The judge has not yet made a decision on Chipotle’s request.
“I think it’s basically vindictive,” Williams said. “They’re upset that these people got notice. They’re upset that they opted in. They’re upset they haven’t been kicked out of the case yet, and they blame the plaintiffs’ counsel.”
Williams said that if the judge doesn’t bar his team from serving their clients, they plan to represent anyone who’s booted from the lawsuit in arbitration ― even if it means taking on more than 2,800 individual cases. That could translate into a massive legal cost for Chipotle.
“I have an obligation to these people,” Williams said. “If we are disqualified from representing them, then they truly will be without a claim. The chance of them finding a [new] lawyer to take these claims individually is slim to none.”
As a result of the Epic Systems decision, it’s likely that more employers will start using class-action waivers in hiring, and fewer workers will wind up in large wage-and-hour lawsuits like the one Chipotle is facing. In Williams’ estimation, “Every employer out there is going to require mandatory arbitration.”
If that comes to pass, it would have impacts beyond workers’ ability to recoup wages they believe they are owed. Given the private nature of arbitration, it would help keep workplace problems out of the public domain where other lawyers or journalists might find them.
It could also take away a major incentive for employers to follow the law. Companies often change the way they do business after costly and embarrassing lawsuits. Like other large employers in low-wage industries, Chipotle counts wage-and-hour lawsuits as one of its top legal risks, for now.
“One of the goals of a lawsuit is obviously to get money, but another is to get a company to change its behavior,” Marvit explained. “If workers went to arbitration there’s no incentive for Chipotle to change. They’re not facing a big enough threat, and they know they never will.”