Sterling Jewelers Inc. might have just gotten a helping hand from the Supreme Court.
And women sales staff who have battled with the retailer for more than a decade, claiming that they have suffered gender discrimination, might face the prospect of pursuing their fight alone.
When workers square off with their employers, the balance of power is usually on the side of the companies, which have the funds and legal fire power to keep on fighting.
One key counterbalance for workers has always been their ability to team up — either in public lawsuits or arbitration proceedings — and form a class, or a group of people with similar complaints who can pool resources and share the rewards.
But employers gained more clout last week when the Supreme Court made it harder for workers in arbitration to form a class.
The retail ripples are already being felt.
Sterling is pointing to the Supreme Court’s recent ruling in Lamps Plus Inc. v. Varela to support its argument that those who haven’t opted-in to the arbitration can’t be a part of it. In the Lamps Plus case, the high court ruled that arbitration clauses refer to individual arbitration, unless the contract clearly allows class claims.
The stakes are high for Sterling and the case could mark yet another turning point for companies, which are always under the legal microscope, but in the Time’s Up era find themselves under increased scrutiny.
An arbitration clause might sound like one of those niche provisions buried in contract boilerplate. But arbitration agreements are increasingly distinctive and can have profound impact — indeed, questions about how they should be interpreted have been intensely litigated over the past decade.
Plaintiffs and class-action advocates generally argue that joining together as a group gives ordinary people leverage and the ability to pool resources that individuals do not have, especially when taking on a more powerful entity like a company.
“It remains really critical that consumers and employees people who may believe they may have been aggrieved by a retailer have the opportunity to join together to pursue their claims,” said Joseph Sellers of Cohen Milstein Sellers & Toll PLLC, an attorney for the plaintiffs in the Sterling case.
Companies favor arbitration because it is generally confidential and usually moves quicker than court cases, which are bound by the rigors and expense of potentially elaborate back and forth arguments every step of the suit. Individual arbitration, in particular, allows companies to avoid having to deal with large groups of plaintiffs whose sheer volume of claims may force their hand, say retail attorneys.
“Businesses like arbitration with individuals because it is a way to avoid class proceedings that many times create exposure that is so great that it must be settled rather than litigated, regardless of the merits,” said Michael Geibelson, a partner at Robins Kaplan LLP who has represented retailers.
But even some Supreme Court justices have tried to flag concerns about how arbitration can effectively be used as a divide and conquer mechanism.
Justice Ruth Bader Ginsburg’s dissents, for instance, have focused on the power dynamics between individuals and companies. In Epic Systems v. Lewis last May, the Supreme Court ruled that employers can impose arbitration provisions that require their employees to resolve employment disputes individually.
Justice Ginsburg wrote in her dissent in that case that separating employees this way could deter them from pursuing claims at all, either because the costs to each individual may outweigh the benefits, or because of the prospect of retaliation.
Class advocates often emphasize those type of practical considerations for regular people trying to seek recourse.
“If I get ripped off by Sprint for $40, it’s not worth my time or money to try to litigate,” said David Marcus, a professor at the UCLA School of Law, invoking a hypothetical example.
“But a class action joins together all of these $40 claims into one case, attracting the services of a plaintiffs lawyer,” he said.
In Sterling’s case, the Supreme Court ruling gave the company another path to try to change the course of the litigation.
The arbitrator in the Sterling case had allowed the dispute to proceed as a class, including those who hadn’t explicitly opted-in to this particular dispute.
Sterling opposed that decision, and a federal court in New York agreed in January 2018 that the arbitrator could not include employees who had not explicitly opted-in to the arbitration. The plaintiffs have challenged that finding to the Second Circuit.
Roughly a dozen or so named plaintiffs, including Laryssa Jock, as well as an estimated hundreds of employees who have opted in, are a part of the arbitration. Sterling estimates the number of those current and former employees who have not opted in to be in the range of 70,000, according to court documents.
The company is arguing to the Second Circuit that those who didn’t opt in to the arbitration can’t be a part of it, and especially not after the Supreme Court’s Lamps Plus ruling last week. The company argues that just like in the Lamps Plus case, Sterling’s arbitration agreement also doesn’t explicitly allow class arbitration.
“As held in Lamps Plus, general common language contained in an arbitration agreement does not equate to the consent of absent class members to participate in a class arbitration,” the company wrote in a letter to the Second Circuit on Wednesday.
One of the next issues to come up in this case would be whether the arbitration should proceed individually rather than with a group of plaintiffs.
“A lower court in the Jock case and now the Supreme Court in Lamps Plus ruled that class claims are inappropriate in this context,” a representative for Signet Jewelers Ltd., Sterling’s parent company, said in a statement Monday. “Once the presiding court in the Jock case decides the class question in the Jock case, which we trust will be soon, we look forward to proceeding to address each claim.”
On Thursday, the plaintiffs in the Sterling case argued that the Lamps Plus ruling doesn’t apply because it involves some different circumstances. They argue that in their case, the parties had allowed the arbitrator to decide whether they could proceed as a class, but in Lamps Plus, the parties allowed the courts to consider that question.
The plaintiffs have also argued previously that Sterling should be bound by the outcome of an arbitration process that it called for in the first place. “Under bedrock arbitration principles (and common sense), Sterling cannot object to an arbitral ruling it solicited and by which it agreed to be bound,” the plaintiffs wrote in their Second Circuit brief in April 2018.
Whether or not Sterling gets its way in the ongoing case, going forward, companies are bound to tighten up the arbitration language in the employment contracts to ensure that, when issues come up, they can be handled one by one.