Supreme Court Upholds Arbitration Clauses

Today (May 21, 2018), the United States Supreme Court, in the case of Epic Sys. Corp. v Lewis, held that employers can require – as a condition of employment – that employees waive their rights to participate in class action lawsuits.  As a result, employers can now rely on arbitration provisions in employment contracts and handbooks as being effective tools to preclude class claims against them, along with the negative publicity that may result from the filing of such claims.  Now, employees who are subject to such arbitration provisions must now bring their claims on an individualized basis.

The decision serves as a blow to employee rights as class actions often serve as a way to incentive employees to vindicate their rights through a cost-effective method that will be heard by a court.  Employees who are subject to arbitration provisions are less likely to proceed on their claims due to the costs involved in litigation and fear of retaliation that may result from the filing of such a  claim against an employer.  Indeed, studies have demonstrated that employees are less likely to prevail in individual arbitration with little success in appealing any decision by an arbitrator.

In the 5-4 ruling, Supreme Court Justice Neil Gorsuch stated that “The respective merits of class actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches where those questions remain hotly contested … This court is not free to substitute its preferred economic policies for those chosen by the people’s representatives.”  In its ruling, the Supreme Court was confronted with the interplay of the Federal Arbitration Act, National Labor Relations Act and, in this case, the Fair Labor Standards Act.

Justice Ruth Bader Ginsburg read a dissent from the bench, calling the decision “egregiously wrong” because there is “strength in numbers” when trying to seek recourse for claims involving, as it was in Epic, wage and hour violations.  She stated that “There can be no serious doubt that collective litigation is one way workers may associate with one another to improve their lot.”

A survey by the Economic Policy Institute recently found that over half of American workers in the non-union private-section already have mandatory arbitration provisions, which can increase to more than eighty percent of workplaces within the next six years if they take advantage of the Court’s ruling.

This decision comes on the heels of the new sexual harassment laws that were enacted in New York State and New York City, part of which prohibits mandatory arbitration clauses for sexual harassment claims as we blogged about earlier this month.  We will now have to wait and see how these laws will be affected by the Supreme Court’s decision.

The Law Offices of Yale Pollack, P.C., located in Syosset, New York (Nassau County, Long Island), can assist employers and employees in understanding their respective rights in the workplace, including how this decision may affect them.  Please call 516-634-6340 for additional information.