Epic Systems Corp. v. Lewis: The Supreme Court Delivers a Major Blow to Employees

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Last month, the U.S. Supreme Court delivered an uppercut to workers’ rights by approving “class action waivers” in private arbitration clauses. In Epic Systems Corp. v. Lewis, the Supreme Court (5-4) held that employers can prevent employees from bringing class actions when there exists a “class action waiver” clause in an arbitration agreement. The Supreme Court’s decision prompted the Court’s matriarch, Ruth Bader Ginsberg, to audibly read her forceful dissent from the bench – an extraordinary gesture by a Supreme Court Justice. To put RBG’s gesture into context, Justice Ginsberg previously read from the bench only in a pinnacle gender discrimination case (Ledbetter v. Goodyear Tire) and the highly publicized 2013 Hobby Lobby case. Justice Ginsberg described the majority opinion as “egregiously wrong” and it “will be [a] huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers.” This begs the question: why is this decision so important?

Simply put, arbitration is  bad for employees. The arbitration process lacks any formal evidence or appeals process, which inherently dilutes an employee’s due process rights. Additionally, the arbitration discovery process is limited – often requiring an arbitrators’ permission to conduct more than one deposition or more than one exchange of written discovery. While arbitration is purportedly cheaper and faster, practically, a dispute in arbitration may outlast a typical civil case, and the associated fees and costs could sometimes exceed that of a civil case. 

Specifically, as to “class action waivers” in arbitration agreements, employees are often more receptive to vindicate their rights on a collective basis than individually. First, it is more expensive and intimidating to bring an individual claim against an employer. Second, a class suit bolsters a claim of an employers’ wrongdoing because there are multiple employees alleging the same wrongdoing. Third, arbitration is typically handled behind closed doors, which limits public accountability for a large business. In sum, arbitration is far more favorable for the employer than the employee; this is especially true in the context of class action waivers.

One of the primary issues addressed in Epic Systems was whether the Federal Arbitration Act (FAA) trumped the National Labor Relations Act (NLRA). The former allows an employer to “settle [just about anything] by arbitration” while the latter legislation emboldened collective bargaining and class-action suits, and was interpreted to exclude “class action waivers” from arbitration agreements. Before Epic Systems, lower courts were divided on this issue. Now, the law of the land is clear – the NLRA does not preclude the enforcement of “class action waivers” in arbitration agreements.

According to the Economic Policy Institute, about 60 million workers in the United States are subject to mandatory arbitration agreements with their employers. Today, if the arbitration agreement contains a “class action waiver,” those workers must sue individually, rather than as a collective and cohesive group. Indeed, this ruling will preemptively chill an employee from vindicating her rights against her employer. 

Justice Ginsberg’s recitation of her dissent is warranted, as the ripple effect of this “egregious” decision is already seen today. In fact, just one day after the Supreme Court’s decision, a nationally renowned employer-defense firm created an automated arbitration “tool,” whereby class action waivers are simply included in the template. Indeed, employers are jumping for joy knowing that a huge hurdle has been placed in front of their legal exposure to wage and hour violations, discrimination suits, and sexual harassment claims by their employees.

With the 2017 appointment of Justice Gorsuch to the Supreme Court, this decision may easily be the first of many major cases to weaken employee rights. Despite a “class action waiver” in an arbitration agreement, an aggrieved employee should speak to an attorney to vindicate her rights. Additionally, an experienced attorney will determine whether an arbitration agreement is even enforceable in the first place. Despite the major blow the Supreme Court dealt to U.S. employees, it is important to keep fighting.

If you feel you have a case against your employer, whether you signed an arbitration agreement or not, please call us at (619) 342-8000 for a free case evaluation.    

[1]                 Epic Sys. Corp. v. Lewis, 200 L.Ed. 2d 889 (2018).

[1]                 https://www.nytimes.com/2018/05/21/business/supreme-court-upholds-workplace-arbitration-contracts.html.

[1]                 https://constitutioncenter.org/blog/reading-a-dissent-from-the-supreme-court-bench/.

[1]                 Epic Sys. Corp. v. Lewis, 200 L.Ed. 2d 889 (2018).

[1]                 Id.

[1]                 https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.

[1]                https://ogletree.com/shared-content/content/blog/2018/may/supreme-court-issues-pro-employer-ruling-on-class-action-waiver-issue.