“Egregiously Wrong” SCOTUS Decision Affects Employees

June 7, 2018

Lía Fiol-Matta, Esq., Ty Hyderally, Esq., and Chaitali Gandhi

On May 21, 2018, the Supreme Court of the United States issued a significant decision in Epic Systems Corp v. Lewis allowing employers to enforce class or collective action waivers in arbitration agreements. As such, employers can require that employees waive their rights to resolve employment disputes through class actions and instead, resolve them through individual arbitration.

The Supreme Court held that these waivers in employees’ arbitration agreements are enforceable under the Federal Arbitration Act, U.S.C. §§1-14 (“FAA”) and do not violate the National Labor Relations Act, 29 U.S.C. §§ 151-169 (“NLRA”). The decision rejects the National Labor Relations Board’s position that class or collective action waivers violate the NLRA’s protection of employees’ right to band together in relation to terms and conditions of employment.

In her dissenting opinion, Justice Ginsburg describes this decision as “egregiously wrong”. She argues that the right of employees to concerted activity to confront their employer is effectively null if they must waive that right to obtain or keep a job that requires the employee to agree to a class action waiver in an arbitration agreement prior to employment. While the SCOTUS decision may be premised on the principle that employees voluntarily agree to these arbitration provisions, in reality it is not optional when employees have no other recourse than to agree with the terms of the arbitration agreement to obtain the job.

Furthermore, while court decisions in employment matters are accessible to the public, arbitration agreements are typically private and mostly unpublished. With this decision, employers might lose their incentive to strictly follow the laws or change bad behavior if they are no longer held publicly accountable and subjected to expensive and embarrassing lawsuits. SCOTUS adopted an expansive interpretation of the FAA in this decision that would likely lead to enforcing these waivers under various employment protection statutes. Critics are also specifically concerned with the effects of enforcing class action waivers in arbitration agreements on discrimination and sexual harassment claims. Although there is a push to end mandatory arbitration of sexual harassment claims, current arbitration agreements bar victims from speaking publicly about their stories, allowing companies discretion and leeway in how they deal with these claims.

The SCOTUS decision is already affecting ongoing cases. For example, approximately 10,000 Chipotle employees joined a lawsuit alleging they were forced to work outside of their hours, without pay. Turner v. Chipotle Mexican Grill, Inc., No. 02-612 (D. Colo. filed 2014).  Chipotle has argued that about 3,000 of these employees do not have a valid claim because they signed class and collective action waivers as a condition of their employment.  With this new ruling, it is possible that those employees will be excluded from the proceedings and will not obtain relief because they started working for Chipotle after it required mandatory arbitration agreements that include a class action waiver.

Some employers opt to resolve disputes through class or collective actions so they do not have to worry about future claims arising from similarly situated class members. However, employers benefit greatly from arbitration agreements instead of trial litigation, and so, it is likely that with this decision, conditions of employment for most employees will routinely include mandatory arbitration agreements with class action waivers. The FAA exempts workers, such as interstate truck drivers and railroad employees, who are employed in foreign or interstate commerce, from mandatory arbitration agreements. If you have any questions or concerns regarding this new SCOTUS decision on class action waivers in arbitration agreements, you may want to consider contacting an employment lawyer.

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