An Epic Decision on Workplace Arbitration

June 04, 2018
Bob Lawless from the University of Illinois College of Law

Bob Lawless from the University of Illinois College of Law

University of Illinois College of Law

In a case called Epic Systems v. Lewis, the Supreme Court has weighed in decisively on behalf of employers in disputes with their employees.For a little over two years, Jacob Lewis worked as a technical writer for Epic Systems, a Wisconsin company that develops healthcare software. Jacob often worked more than forty hours a week, but Epic did not pay him overtime. The company believed Jacob was exempt from laws requiring overtime pay.

Jacob disagreed. Although the dollars involved in his one dispute were not huge, Jacob brought a class-action lawsuit on behalf of himself and the other technical writers at Epic. Together, their losses were big enough to justify the expense of a lawsuit. While Jacob was working at Epic, he had received an email that had both an agreement to arbitrate wage claims and to do so only as an individual. The email stated, “I understand that if I continue to work at Epic, I will be deemed to have accepted this Agreement.” There was a button for Jacob to indicate his consent, but there was no way for Jacob to decline and keep his job.

In a 5-4 decision and over a strong dissent from Justice Ginsburg, the Supreme Court said this email meant Jacob had to arbitrate his claim individually. Some might question whether the take-it-or-leave-it proposition from his far more powerful employer meant Jacob had entered into an enforceable contract. But, the Supreme Court long ago got past the nicety of whether forcing litigants into arbitration requires their meaningful assent to do so.

Rather, the question for the Court was whether the National Labor Relations Act gave Jacob a right to act collectively with his fellow employees. Passed in 1935, the labor law protects employee’s rights “to engage in concerted activities for . . . mutual aid or protection.” Thus, Jacob argued that the labor law overrode the 1925 Federal Arbitration Act that requires federal courts to enforce arbitration agreements. The arbitration law also says it does not apply to contracts of employment involving “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

The Court said the labor law’s protections for employee group activity only apply to typical worker actions like unionization and not to litigation. As to the employment contract exception in the arbitration law, the Court had ruled previously that it only applied to transportation workers. The Court congratulated itself for harmonizing the two statutes – although ruling one controls the other is hardly harmonic.

The Court also said it was furthering a strong federal policy in favor of arbitration, a policy that the Court itself had announced thirty-five years ago. The Court was not blind to the notion that a class action can aid enforcement of rights but noted that class actions also can “unfairly place pressure on the defendant to settle even unmeritorious claims.” Class actions certainly are sometimes abused and force companies to settle frivolous claims.

What is the greater problem? Unenforceable employee rights or frivolous class actions? The Court decided it was the latter, In writing for the Court, Justice Gorsuch claims only to be enforcing a congressional choice about the greater evil. However, a string of Supreme Court cases over the past forty years has expanded the arbitration law far beyond its original purpose of helping merchants settle disputes. Still, the Court said it had found incontrovertible meaning in the 90-year old arbitration law obviously written by people who had no idea this later case law would exist.

In doing so, the Court offers a road map for employers to limit the ability of employees to recoup pay unlawfully held from them. In the wake of the Court’s decision, there already are reports that employers are increasing their use of arbitration agreements. I expect that trend will continue.