Pro-Employer Supreme Court Term Featured Arbitration, Union Fees and Whistleblowers

This past term, the Supreme Court issued key rulings for employers involving arbitration and whistleblower law, leaving little doubt where it stood on employment issues, while also dealing a significant setback to unions nationwide with its blockbuster ruling in Janus v. American Federation of State, County and Municipal Employees.

While, the Court stopped short of resolving whether Title VII of the Civil Rights Act covers sexual orientation – an issue that continues to divide federal appellate courts – it was nonetheless an eventful term. In an XpertHR webinar last month, Los Angeles employment attorney Anthony Oncidi and I explored the most notable developments affecting the workplace.

An Epic Arbitration Ruling

In Epic Systems Corp. v. Lewis, the Supreme Court held that companies may force their employees to arbitrate employment disputes individually rather than as part of a class action. This 5-4 ruling could affect an estimated 25 million employment contracts.

The arbitration clauses at issue required employees to submit their wage and hour claims to binding arbitration and to do so only on an individual basis. Employees had claimed that the National Labor Relations Act makes these arbitration agreements illegal because the contracts denied the workers the right to engage in “concerted activities for their mutual aid and protection”.

But writing for the majority, Justice Neil Gorsuch disagreed. He explained that Congress has instructed the federal courts to enforce arbitration agreements according to their terms, including terms providing for individual arbitration proceedings.

Denver employment attorney Steven Suflas said the Court’s holding makes clear that employers have a vehicle to sidestep the threat of class and collective actions, especially under the Fair Labor Standards Act. “[It] may give employers additional ammunition in resisting the expansive views of the Obama NLRB about the application of the NLRA to non-union workplaces,” said Suflas, who practices with Ballard Spahr.

Oncidi, who heads the labor and employment department at Proskauer Rose’s Los Angeles office, agrees there is no question the Court’s pronouncement is a pro-employer ruling. But he adds that its reach is far from limited to the wage and hour realm. He notes, for instance, that the decision would permit employers to compel individual arbitrations in sexual harassment cases.

Gerald Maatman, who chairs the Class Action Defense Group at Seyfarth Shaw, said it’s possible that not all of the consequences of Epic Systems will be positive for employers. Maatman noted that the ruling could lead plaintiffs’ attorneys to file individual arbitration claims early and more often, which he said could be “death by 1,000 cuts.”

Still, those employees will need to convince attorneys that their cases will be worthwhile to take in the first place, so the practical implications remain to be seen.

Unions Suffer Significant Setback

In contrast, the ramifications from the Supreme Court’s Janus ruling are already being felt, and there is no way to interpret them as anything other than an abject defeat for unions. The Court’s 5-4 ruling overturned more than 40 years of settled labor law with its holding that states and public-employee unions may no longer collect agency fees from non-union employees who object to paying them.

Public sector unions have long relied on these agency fees to subsidize their collective bargaining efforts and related activities. But writing for the Court, Justice Samuel Alito said individuals may not be coerced into betraying their convictions and that the compelled subsidization of private speech “seriously impinges on First Amendment rights.”

Oncidi views the Supreme Court’s decision as a “massive defeat for organized labor,” and suggests that it also could impact unions in the private sector.

Some have speculated that there will be a lot less money for political campaigns to push union-friendly legislation. For instance, the Service Employees International Union (SEIU) reportedly cut its budget by 30 percent this year in anticipation of the Janus ruling.

Currently, there are 28 states with right-to-work laws that generally prohibit agency fees, but this case affects the ability of unions to collect those fees in the 22 other states that do not have such laws, including:

  • California;
  • Illinois:
  • New York; and

Writing for the dissenters, Justice Elena Kagan said, “The majority undoes bargains reached all over the country” and added that it will wreak havoc on entrenched contractual arrangements. During oral arguments in the case, Kagan had noted that contracts covering up to 10 million workers could be invalidated.

Blowing the Whistle on Whistleblowers

A unanimous Supreme Court ruling from February could limit job protections for corporate whistleblowers. The Court held in Digital Realty Trust v. Somers that an employee must provide information about securities law violations to the Securities and Exchange Commission (SEC) in order to be protected from retaliation.

The case involved the Dodd-Frank Act, which applies to internal whistleblowers. A vice president at Digital Realty claimed the company terminated him after he reported suspected securities law violations by a supervisor to senior management.

Writing for the Court, Justice Ruth Bader Ginsburg noted that the core objective of Dodd-Frank’s whistleblower program is to add the Commission’s enforcement efforts by “motivating people who know of securities law violations to tell the SEC.” Since the vice president did not notify the SEC directly, the Court held that he could not qualify as a whistleblower.

Farewell Justice Kennedy

Justice Anthony Kennedy officially left the Supreme Court on July 31, leaving it with eight members for the time being. Justice Kennedy was a frequent swing voter on a host of hot-button issues, most notably with gay rights, affirmative action and abortion. But he generally sided with employers.

As a result, Oncidi asserts that if the Senate confirms DC Circuit Judge Brett Kavanaugh as Kennedy’s successor, the impact on employment law might be less than some might think. In the Epic Systems and Janus cases mentioned above, for instance, Kennedy voted with the majority and his potential successor would almost certainly do the same.

Where his departure potentially could be felt is if the Supreme Court decides to resolve whether Title VII of the Civil Rights Act covers sexual orientation. The High Court declined to hear an appeal this term, but it’s entirely possible it will confront this issue in the coming years.

For more key takeaways for employers from the Supreme Court’s 2017-2018 term, listen in to XpertHR’s recent webinar.


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