Financial regulation

By Ann C. Hodges, a professor of law at the University of Richmond

In the past 20 years the Supreme Court has interpreted the Federal Arbitration Act broadly, allowing businesses to require consumers and employees to arbitrate, rather than litigate, many legal claims. Businesses frequently use arbitration agreements to bar class actions, which can be costly and time-consuming. Just last term, in AT&T v. Concepcion, the Court enhanced this business tool, striking down a California law that prevented businesses from barring class actions in cases involving small claims brought by less powerful parties bound to arbitrate by contracts of adhesion. Although the case involved consumers, it offered employers a vehicle to restrict employee class actions.

The NLRB’s decision in D.R. Horton, issued in early January, significantly limited the effectiveness of this tool for employers by invalidating an arbitration agreement that banned class actions. This case is likely to generate significant controversy, provoking even more attacks on the agency by its vocal critics, but experienced labor lawyers will recognize the case as an unremarkable application of long-settled legal principles.

Class claims frequently offer the only vehicle for consumers or employees to challenge unlawful actions that cause limited damages to each individual while often reaping millions for the business. For each person injured, the cost of litigating a claim outweighs the potential benefit.  Without class actions, these claims often go unremedied. In the workplace, Fair Labor Standards Act cases seeking minimum wage or overtime payments are most likely to be abandoned on this basis and Horton involved such a claim, alleging that the nonunion employer misclassified employees as exempt from overtime pay.

by Nicole Flatow

The case that Barack Obama’s recess appointment of Richard Cordray (pictured) and three others was constitutional “ought to be a slam dunk,” writes Harvard constitutional law professor Laurence Tribe in The New York Times.

The Chamber of Commerce has already threatened to launch a court challenge to the move, but Obama’s decision to fill the top spot at the Consumer Financial Protection Bureau and three vacancies on the National Labor Relations Board has “strong support both from the text and the original purpose of the recess appointment clause,” Tribe explains.

For one thing, holding “sham sessions” every three days during which no business is conducted does nothing to change the nature of the Senate recess, Tribe writes.

As a Washington Post editorial that also takes aim at the pro forma sessions describes it: