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A New Lochner Era?

— February 3, 2016

Ever seen this?

Any dispute arising from the performance of this contract will be submitted to

binding arbitration. Employee waives all rights to a trial in a court of law.

If you’ve gotten a job or a credit card in the last several years, you probably have seen this bit of legal bullying. And you’ve probably gone ahead and signed your rights away with the queasy feeling that you had no choice.

Supreme Court Justice Ruth Bader Ginsburg recently likened such ubiquitous clauses to the notorious case Lochner v. New York. In that 1905 case, known to every law student, the Supreme Court ruled that a New York state law restricting the hours per week bakers could work was unconstitutional because it violated bakers’ liberty to form contracts. Savor that. Imagine the low-wage laborer and his lawyer sitting down with a prospective employer to hash out the details of their employment contract. The absurdity of such a scene rises proportionally with unemployment statistics so that, here in 2016, the concept of “liberty of contract” seems like a bad joke more than a legal principle.

The “Lochner Era” extended well into the 1930’s, when a more progressive Court overturned the case in favor of state laws protecting workers’ and consumers’ rights. To listen to Justice Ginsburg, though, it seems we may be entering something like a Lochner Era of our own.

“I was reminded of Lochner reading some decisions of the Court concerning workers, consumers, credit card holders who signed” arbitration agreements, Ginsburg recently told an audience at Brandeis University. “And that has also been described as tied to liberty of contract.”

The decisions Ginsburg alludes to began to appear in the 1980’s. It was then that the Court began to read the 1925 Federal Arbitration Act much more broadly. The Act was established to permit, in Ginsburg’s words, “merchants with relatively equal bargaining power” to choose arbitration rather than courts of law to resolve their disputes. With the Rehnquist Court, however, the Act was seen to include cases where businesses required their employees and customers to sign arbitration clauses, thereby forfeiting their right to a court trial.

But can a clause that gives you a queasy feeling of helplessness really constitute a binding agreement? The basic principles of contract law and Constitutional law—the basic principles of fairness—say no. But such basic principles often hold little sway in our brave new corporate world. Consider the Court’s 2001 decision in Circuit City Stores v. Adams. The Court held that employers could require employees engaged in foreign or interstate commerce to sign arbitration agreements, despite the fact that the Federal Arbitration Act specifically excludes “workers engaged in foreign or interstate commerce.”

Such decisions are not only reminiscent of the anti-worker Lochner case but might also remind some of us of the primary lesson law school teaches: that the law is whatever the judge says it is. And with today’s judiciary, including the Supreme Court, squarely in the vest pocket of corporate power, we may well conclude that we have indeed entered another Lochner Era.

Source:  Justice Ginsburg’s Warning to the American Worker

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