26 Jun The Supreme Court’s Term Has An Epic Impact On Employment Litigation
On Monday, May 21, 2018, the Supreme Court issued a decision in Epic Systems Corp. v. Lewis (“Epic”). In a 5- 4 decision, the Court held that class or collective action waivers contained in arbitration agreements are valid and enforceable. This is considered the most important business decision of the 2018 term and will have a huge impact on employment litigation. The three cases underlying Epic represented a clash between employers seeking to handle employment disputes on a one on one basis through arbitration and employees who typically do not have the time or resources to litigate claims individually and prefer to join together in a class. The decision is a huge win for employers and will likely reduce the number of class actions they face. Conversely, it is a major blow for employees, who now may be forced into contracts where they have to individually litigate their employment claims, which only deepens the employer-employee power imbalance.
Justice Gorsuch wrote the majority opinion and concluded: “[t]he policy may be debatable, but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.” The majority reasoned that the Federal Arbitration Act (“FAA”) is unequivocal in its mandate that courts enforce arbitration agreements. The Court further explained that “[t]he National Labor Relations Act (“NLRA”) secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum” and concluded that the NLRA does not render a class waiver unlawful. Accordingly, employers may now require workers to waive their right to a class-action as a condition for employment.
Justice Ginsburg read her very sharp dissent from the bench. She called the majority opinion “egregiously wrong,” and explained that the Court’s decision “forgets the labor market imbalance that gave rise to the NLGA [Norris-LaGuardia Act] and the NLRA and ignores the destructive consequences of diminishing the right of employees ‘to band together in confronting an employer.’” She also called for a congressional intervention to correct the “Court’s elevation of the FAA over workers’ rights.” It is likely that Democrats will now seek to introduce a corrective legislation, as this decision affects millions of workers by significantly impairing their right to collective action.
A take-away for employers: arbitration agreements with class waivers will likely reduce class and collective actions, and, thus, they are worth implementing. There are also other benefits to arbitration, i.e. it provides a faster, less costly, and more predictable resolution of litigation. Employers who currently have mandatory arbitration agreements should review their scope to ensure that they are not unconscionable and make sure that they include appropriate class waivers. Employers who have voluntary arbitration agreements should evaluate them and assess whether it might be more beneficial to implement a mandatory arbitration agreement with a class waiver. Employers who do not have any arbitration agreements should consider implementing them to effectively protect themselves. The importance of the Supreme Court’s decision has become immediately clear. Following Epic, the Hon. Jeffrey Miller in California Southern District ruled in Ralph v. Hosseini, et al. (case No. 3:17-cv-01332) that a proposed class of Domino’s Pizza delivery drivers must arbitrate their business expenses reimbursement suit against the owners of Domino’s franchise stores because of the agreement they signed. Similarly, the Hon. Otis Wright in California Central District in Ji In Houck v. Steptoe and Johnson LLP (Case no. 2:17-cv-04595) dismissed a former Steptoe’s associate proposed class action against the firm because of the signed agreement to arbitrate claims.
Although this decision is considered a major blow to workers, it is important to note that the class waivers in the arbitration contracts do not ban all multi-litigation. For instance, in California employees who entered into class waivers may still bring PAGA claims. Additionally, government agencies, i.e., the EEOC, may seek relief on behalf of employees regardless of class waivers. Further, the FAA does not apply to certain employees, such as those in the transportation industry. Also, arbitration proceedings are cheaper and faster than litigation and provide a good forum for pro se claimants.
Evelina Gentry
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