Depending on your perspective, the Supreme Court’s decision yesterday in Epic Systems Corp. v. Lewis provided much-needed certainty to employers or dealt a serious blow to employees. The vote was 5 to 4, and the Court’s newest justice, Neil Gorsuch, authored majority decision joined by the so-called conservative justices. That majority decision held that employers do not violate the National Labor Relations Act (“NLRA”) if they require employees to forgo the ability to pursue class actions by including waiver provisions in arbitration agreements the employees must sign as a condition of employment. In other words, employers now may require their employees to sign an agreement that requires the employee to arbitrate any work-related claims on an individual basis.
In her dissent, Justice Ruth Bader Ginsburg, joined by the so-called liberal justices, called the majority opinion “egregiously wrong” and called on Congress to address the matter. There likely is a fair amount of skepticism regarding whether Congress will answer the call.
Agreements requiring employees to pursue work-related claims in arbitration, rather than in court, are not new. By some accounts, more than half of all non-unionized employers require their employees to sign agreements to arbitrate their work-related claims, and the number is growing. These agreements have long been enforced.
In 2012, the National Labor Relations Board (“NLRB”) ruled that employers violate the NLRA when they require employees to sign these arbitration agreements when the agreements include a class action waiver. According to the NLRB, the class action waiver violated the right of employees to pursue, without interference, “concerted activities” related to the terms and conditions of their employment, including filing class action lawsuits.
The Supreme Court considered three consolidated cases. Each concerned charges that defendant-employer had underpaid its employees. Also in each, the employees’ employment contracts required that the employees resolve their disputes in arbitration (and not in court) and that the claims be filed individually.
The Majority Decision
Ultimately, the majority decided that the NLRA does not trump the Federal Arbitration Act (“FAA”). Further, the NLRA’s focus on protecting employees’ rights to engage in “concerted activities” does not extend to protecting an employee’s right to participate in a class action.
The decision itself is largely unsurprising in light of the Supreme Court’s favorable view of the FAA. In its 2011 AT&T Mobility v. Concepcion decision, the Court ruled that the FAA allowed companies to avoid class actions with consumers by insisting on individual arbitrations in those take-it or leave-it contracts.
Justice Ginsburg’s dissent is lengthy and highlights many policy concerns that may result from the decision. These include the risk that individual employees may not pursue claims, because individually the claims do not justify the litigation costs or the risk of employer retaliation and the risk of inconsistent results in similar cases because arbitrations typically are confidential.
In this ideologically divided decision, employers take away what will be viewed by many as a victory. Employers now know with certainty that class action waivers in arbitration agreements with their employees are enforceable and do not violate the NLRA. While the decision certainly is not a welcome one for employees, all is not lost. Employees still may be able to pursue work-related claims collectively in court under certain state laws. The potential also exists for multiple employees to each assert and pursue their individual claims simultaneously.