U.S. Supreme Court Okays Mandatory Employment Arbitration

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The U.S. Supreme Court has issued an opinion that could affect employee rights nationwide. The decision in Epic Systems Corp v Lewis allows employers to use mandatory employment arbitration clauses in their contracts, cutting employees off from class actions and other public legal proceedings. Even while publicity around sexual harassment and the #MeToo movement are showing the importance of transparency in the litigation process, this Supreme Court decision allows employers to prioritize privacy over their workers' rights.

In this blog post I will discuss the recent United States Supreme Court decision, Epic Systems Corp v Lewis (Epic Systems). I will explain how mandatory employment arbitration works, and what the court’s decision means to employees hoping to join together to end employment discrimination or other workplace abuses.

Employees Use Class Actions to Address Problems at Work

Epic Systems was the result employees at three separate companies coming together to address problems at work, and in their paychecks. The lawsuits, which were consolidated for consideration by the Supreme Court, included Ernst & Loung LLP v Morris, where a junior accountant said his employer had violated the Fair Labor Standards Act by not paying for overtime to him, and a class of employees under similar circumstances. But Mr. Morris's employment contract, and the contracts in the other consolidated cases, included a mandatory employment arbitration provision. It said that any employment disputes, including disagreements about overtime pay, had to be taken to independent, private arbitration, rather than federal court.

The U.S. Supreme Court was asked to determine if the employers were legally allowed to use mandatory employment arbitration to avoid public litigation by classes of employees. Because these contracts required each dispute to be resolved separately, they had the effect of cutting off employees from the ability to sign on to class action lawsuits to protect their rights at work.

U.S. Supreme Court Says Arbitration Act Okays Mandatory Employment Arbitration

The legal question pit two federal statutes against one another. The Arbitration Act requires courts to enforce agreements to use arbitration in place of traditional legal processes to resolve disputes. The Fair Labor Standards Act (FLSA) prohibits employers from interfering with workers' efforts to engage in "concerted activities" to protect their rights at work. Traditionally, the FLSA protects workers' right to unionize, negotiate contracts, and come together to address problems at work. The National Labor Relations Board under the Obama Administration had said this necessarily included workers' right to use class action lawsuits to enforce wage and hour laws and other employment problems.

But the Supreme Court disagreed. In a split decision, 5 of the 9 justices ruled that the federal Arbitration Act overruled the FSLA when it came to mandatory employment arbitration. The Court said "concerted activities" was only intended to include traditional labor union activities. The Court would not extend those protections to include class action or other joint efforts to correct problems at work. If employers and employees agreed to mandatory employment arbitration in their contracts, the Court said judges were required to enforce those agreements.

Justice Ginsberg Dissents to Protect Workers' Rights

Justice Ruth Bader Ginsberg and the Court's three other more liberal justices joined in a powerful dissent that Justice Ginsberg read from the bench -- a sign of how important she felt the issue was. She called the majority's decision an "egregious wrong" that will cause "huge under-enforcement" of employment laws. Justice Ginsberg wrote that mandatory employment arbitration agreements have skyrocketed from only 2% of non-union contracts in 1992 to 54% today. That means 23% of non-union employees have entered contracts that give up their right to class action protections.

In reviewing the opinion, Brian T. Fitzpatrick, a law professor at Vanderbilt University, told the New York Times:

"[Justice Gorsuch] appears to have put his cards on the table as firmly in favor of allowing class actions to be stamped out through arbitration agreements. ... [I]t is only a matter of time until the most powerful device to hold corporations accountable for their misdeeds is lost altogether."

Class Action Lawsuits Protect Against Workplace Abuses, Including Sexual Harassment

The Epic Systems decision has the potential to affect far more than disputes about overtime pay. The Equal Employment Opportunity Commission (EEOC) and private employment discrimination attorneys often use class actions to address violations of Title VII of the Civil Rights Act and the Equal Pay Act. By bringing all of an employer's similarly situated workers together in a single lawsuit, employment lawyers can build stronger cases for hostile work environments in sexual harassment cases, or show that women are paid less simply for being women. As Justice Ginsberg explained,

"By joining hands in litigation, workers can spread the costs of litigation and reduce the risk of employer retaliation."

However, now that the U.S. Supreme Court has approved mandatory employment arbitration, employers may be able to use their workers' contracts to force issues of sexual harassment, discrimination, and unfair wages into private arbitration and away from EEOC or class action enforcement. Employers, in turn, may run the risk of small-scale violations of federal employment laws, knowing that their employees have contracted away their ability to come together to stop them.

The Epic Systems decision could have long-lasting effects on employee rights, and their ability to enforce those rights in court. Now that the U.S. Supreme Court has approved the use of mandatory employment arbitration agreements, more workers are going to find their employment complaints addressed behind closed doors, rather than open court.

At Eisenberg & Baum, LLP, we have employment discrimination attorneys who know how to fight for workers' rights in the courthouse, and in private arbitration. We will meet with you to review your employment contract and develop a strategy to protect your rights. Contact us today to schedule a free consultation.

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