By Elizabeth Farley
In May 2018, the Supreme Court of the United States ruled in a 5-4 decision that an employer may include in employment contracts a provision that requires employees to arbitrate their disputes on an individual basis, thus waiving the right to arbitrate disputes with other employees.[1] This judgement decided three cases that were consolidated and argued simultaneously: Epic Systems Corp. v. Lewis; Ernst & Young LLP v. Morris; and National Labor Relations Board v. Murphy Oil USA.[2]
The court examined two Congressional acts during this decision: the Federal Arbitration Act (“FAA”) and the National Labor Relations Act (“NLRA”). The FAA, enacted in 1925, states that arbitration is a valid, irrevocable, and enforceable means to solve a dispute between an employer and an employee.[3] The NLRA allows employers to work together for “mutual aid and protection.”[4] The NLRA gives employees the right to organize and create unions and participate in collective bargaining.[5] The Court’s decision came after employers put provisions in their employment contracts that waived the rights of employees to settle arbitration disputes jointly.[6] Before the Epic Systems Corp. decision, in situations where employers included individual arbitration clauses in their employment contracts, the FAA and the NLRA conflicted. Employers argued that they had a right to include arbitration agreements in their employment contracts as they saw fit, but employees argued that they had a right to work with other employees under the NLRA.[7] In Epic Systems Corp. the Court decided that the FAA trumps the NLRA, stating that “[n]othing in the FAA or this Court’s case law, however, requires subordination of the NLRA’s protections.”[8]
By signing arbitration agreements, it is already more difficult for employees to assert their rights in the workplace.[9] Arbitration generally favors employers.[10] Therefore being able to participate in arbitration with other employees allow for multiple cases to be considered at once and employees could pay the arbitration fees together.[11] With this recent Supreme Court decision, the benefits that joint arbitration offered employees have been eliminated.[12]
This decision has a large, negative effect on employees; employees are already experiencing this effect across the nation.[13] Arbitration can be expensive and employees rely on the ability to incur these legal fees with other employees in a similar situation.[14] Employers can join together to collectively bargain against their employees and negotiate things such as better pay, benefits, and improved work conditions.[15] Employees who sign employment contracts containing arbitration agreements are already waiving their right to go to court over employment disputes, but the decision in Epic Systems Corp. ensures that employers can further limit their employees’ rights by forcing them to waive their right to joint arbitration when it comes to situations where employees are disputing with their employers.[16]
This decision can also affect anti-discrimination efforts.[17] Workers depend on the ability to come forward with other workers who are experiencing similar discrimination from employers.[18] Workers are dependent on collective action for race and sex discrimination and the decision in Epic Systems Corp. will make it possible for employers to deny collective action in an environment that is already employer friendly.[19]
The immediate effect of the Epic Systems Corp. decision can be observed in several pending court cases.[20] A group of current and former employees suing Fiat for race discrimination will now have to each take their claims to individual arbitration.[21] The Eastern District of Michigan court ordered all but two plaintiffs to individual arbitration.[22] The two employees who are able to continue their case are employees who were hired before Fiat implemented the individualized arbitration policy.[23] Similar cases are likely to be dismissed and plaintiffs attempting to participate in joint arbitration will be forced into individualized arbitration.
[1] Amy Howe, Opinion Analysis: Employers Prevail in Arbitration Case, SCOTUSblog (May 21, 2018), https://www.scotusblog.com/2018/05/opinion-analysis-employers-prevail-in-arbitration-case/
[2] Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018).
[3] See Howe, supra note 1 (discussing the Federal Arbitration Act, 9 U.S.C. § 2 (1925) (current version at 9 U.S.C. § 2 (1947)).
[4] See id. (discussing the National Labor Relations Act, 29 U.S.C. § 151 (1935)).
[5] See generally Celine McNicholas & Marni von Wilpert, The Joint Employer Standards and the National Labor Relations Board, Economic Policy Institute (May 31, 2017), https://www.epi.org/publication/the-joint-employer-standard-and-the-national-labor-relations-board-what-is-at-stake-for-workers/ (discussing the NLRA and the benefits it provides workers).
[6] See generally Epic Sys. Corp., 138 S. Ct. at 1616 (stating that in each of the three cases that the Court was deciding, employees signed an employment contrast that stating that employment disputes would be resolved through individualized arbitration proceedings).
[7] See generally id. (discussing the conflicting laws).
[8] Id. at 1642.
[9] See generally Lynne MacDonald, What are the Benefits of Employment Arbitration, Chron, (2018), https://smallbusiness.chron.com/benefits-employment-arbitration-14693.html (stating that arbitration agreements make it more difficult for employees to enforce their rights against employers).
[10] See id. (stating why employers prefer arbitration compared to other dispute resolution mechanisms).
[11] See id. (identifying the benefits of arbitration for employees and employers).
[12] See generally Epic Sys. Corp., 138 S. Ct. at 1642.
[13] See Lisa Burden, Effects of ‘Epic’ SCTOUS Ruling Emerge as Employees Ordered into Arbitration, HRDive, (May 30, 2018) https://www.hrdive.com/news/effects-of-epic-scotus-ruling-emerge-as-employees-ordered-into-arbitratio/524514/ (discussing the effects the Supreme Court decision in Epic Systems Corp. has already had for employees).
[14] Dustin Beilke, What is the Impact of the U.S. Supreme Court’s Epic Decision?, Madison Magazine, (Sep. 19, 2018), https://www.channel3000.com/madison-magazine/city-life/what-is-the-impact-of-the-us-supreme-courts-epic-decision-/797212214.
[15] See generally Katie Barrows, The Benefits of Collective Bargaining for Professionals, Department for Professional Employees (2017), https://dpeaflcio.org/programs-publications/issue-fact-sheets/the-benefits-of-collective-bargaining-for-professional-and-technical-workers/ (identifying collective bargaining and its benefits for employees).
[16] See Celine McNicholas, In Epic Systems Corp. Decision, the Supreme Court Deals a Significant Blow to Workers’ Fundamental Rights, Economic Policy Institute, (May 21, 2018) https://www.epi.org/press/in-epic-systems-decision-the-supreme-court-deals-a-significant-blow-to-workers-fundamental-rights/ (discussing the effect of the Court’s Epic Systems Corp. decision).
[17] See id. (discussing effect on race and sex discrimination cases).
[18] See Burden, supra note 13 (discussing the effects that this decision will have on discrimination and harassment based on sex in the workplace).
[19] See id. (discussing employees needing to take individual action in a process that already favors employers).
[20] See Burden, supra note 13.
[21] See, e.g., id. (stating that in Williams v. Fiat Chrysler Auto. LLC., No. 17-10097 (E.D. Mich., May 24, 2018) the employee plaintiffs will need to take their cases to individual arbitration against their employer).
[22] See generally id. (discussing why the cases were being dismissed by the court).
[23] See id.
