Mandatory Arbitration in Employment Case Opens Supreme Court's Term
Author: David B. Weisenfeld, XpertHR Legal Editor
October 3, 2017
The US Supreme Court opened its term yesterday by hearing an arbitration dispute affecting an estimated 25 million workers and their employment contracts. At issue in Epic Systems Corporation v. Lewis is whether an employer may compel its employees to arbitrate workplace disputes individually, rather than as part of a class action.
The federal appellate courts have been deeply divided over the issue, so much so that the Court heard three cases consolidated into one. The 7th Circuit and 9th Circuit Court of Appeals both ruled that arbitrations agreements that prevent employees from filing class actions violate the National Labor Relations Act (NLRA). But the 5th Circuit ruled that such waivers are indeed legal in NLRB v. Murphy Oil USA.
The Supreme Court has voted to uphold the use of mandatory arbitration clauses in employment as consistent with the Federal Arbitration Act (FAA) in a series of 5-4 rulings. Most recently, the justices upheld a mandatory arbitration agreement in the consumer context in AT&T Mobility v. Concepcion.
The current cases involve employees who, as a condition of their employment, signed arbitration agreements that barred them not only from bringing lawsuits but also from bringing arbitration proceedings on a collective or class-wide basis. The employees argue that these clauses interfered with their rights under Section 7 of the NLRA to engage in protected, concerted activities. Thus, they claim that their right to proceed collectively cannot be waived.
Justice Stephen Breyer seemed to agree, saying he feared upholding the arbitration agreements would overturn decades of labor law.
Justice Ruth Bader Ginsburg went even further in saying, "In these kinds of contracts, there is no true bargaining. This has all the same features of a 'yellow-dog' contract. The employer says you want to work here, you sign this." Justice Ginsburg also noted that it is much more expensive for individual workers to proceed with a case on their own.
But when employees' attorney Daniel Ortiz argued that the FAA creates an exception for contractual provisions that are illegal, Chief Justice John Roberts pounced on that comment in saying, "Well that kind of begs the question. We're trying to figure out if this illegal." The Chief Justice added, "You can't assume that that type of arbitration agreement is illegal, and, therefore, it's covered by a clause that prevents the enforcement of illegal arbitration agreements."
Perhaps more tellingly, the Court's frequent swing voter, Justice Anthony Kennedy, suggested that three employees going to the same attorney and proceeding individually in arbitration is collective action - a position much closer to that of the employers.
The US Chamber of Commerce and the HR Policy Association have filed briefs in the case urging the Supreme Court to uphold these arbitration agreements. The outcome ultimately is likely to turn on the votes of Justice Kennedy and the Court's newest member, Justice Neil Gorsuch.