Supreme Court Sides With Employers for Arbitration

Employers and the current administration are touting a victory after the Supreme Court issued a ruling recently that would in effect allow employers to block employees from standing together to form a class for a legal fight over employment arbitration agreements. The opinion of the Court was a 5-4 majority and was announced by Justice Neil Gorsuch in his first major decision since being appointed to the Court last spring.

The case

The case of Epic Systems Corp vs. Lewis made its way through appeals to the Supreme Court where the court sided with employers barring the right for employees to ban together and form a legal class. An employee of Epic Systems, a healthcare company based out of Wisconsin filed a lawsuit against the company as a collective legal action on behalf of the company’s technical writers citing violations of the Fair Labor Standards Act of 1938 which is a Wisconsin state law that affects overtime pay.

Epic argued for the dismissal of the case citing the fact that Lewis had signed an individual arbitration agreement when beginning his employment that would ban him from taking any collective action against the company and require an individual arbitration to resolve the dispute. The District Court disagreed and refused the dismissal stating that the arbitration he was made to sign was a violation of the National Labor Relations Act and that the collective action could proceed. After again being refused at the Circuit Court level the Supreme Court overruled the lower court’s decision and allowed the case to be dismissed stating that the arbitration agreement was binding.

How the Supreme Court opinions played out

Most of the opinions brought down by the Supreme Court were as expected with Justice Gorsuch endorsing the approach to arbitration clauses. Justice Ruth Bader Ginsburg’s dissenting option was expected though she surprised everyone by reading her opinion from the bench. She called the arbitration clause “egregiously wrong,” and went on to state, “the court today holds enforceable these arm-twisted, take-it-or-leave-it contracts — including the provisions requiring employees to litigate wage and hours claims only one-by-one. Federal labor law does not countenance such isolation of employees.” Gorusch responded to Ginsburg’s claims that the decision could resurrect old contracts which included the barring of union formation as a “false alarm.”

The case not only provides a clash between employers who wish to handle disputes through arbitration with employees who wish to band together to bring their disputes through class action cases, it also pits two federal laws directly against each other. The National Labor Relations Act provides employees with the right to organization for the purpose of aiding or protecting each other, while the 1925 Federal Arbitration Act allows employers the right to settle through means of arbitration.

What impact will the ruling have?

The Court’s decision is expected to deal a major blow to the rights of employees who individually may lack the means, skills, or time to litigate against their employers alone. With collective action bans allowed in consumer contracts, employers were expecting the same fate to occur with employment contracts. By allowing employers to utilize these waivers of employees’ rights to collective action it can become more intimidating to employees who may not find it advantageous to pursue individual claims.

Employees enjoy the support and protection of the National Labor Rights Act which believes such waivers of rights to be violations of labor laws, but this new Supreme Court ruling will override this claim making it harder for employees to exercise their rights under the act to join together to improve working conditions and bring disputes when violations occur. As stated by Justice Stephen Breyer during oral arguments, allowing the employers to prevail in this case can result in “overturning labor law that goes back to, for FDR at least, the entire heart of the New Deal.”