The Court finds that permitting employees to engage in collective legal action under the National Labor Relations Act would “impermissibly disfavor” arbitration under the FAA, giving employers the green light to silo workers and suppress claims through forced arbitration clause class, collective, and joint action bans.

Comments Off on The Court finds that permitting employees to engage in collective legal action under the National Labor Relations Act would “impermissibly disfavor” arbitration under the FAA, giving employers the green light to silo workers and suppress claims through forced arbitration clause class, collective, and joint action bans.

Epic Systems, Corp. v. Lewis, 138 S. Ct. 1612 (2018)
 

Relevant Facts: The U.S. Supreme Court granted certiorari and consolidated three separate cases with similar facts. Each case involved a group of employees trying to band together to enforce their right to unpaid wages. In each instance, the ability to move forward as a class was challenged when their employer invoked a class or collective action ban in the company’s forced arbitration provision. Under the bans, the workers were required to resolve all disputes in individual binding arbitration. The employees objected, arguing that the National Labor Relations Act (NLRA) and the Norris-LaGuardia Act (NLGA) protect workers’ right to act collectively for their “mutual aid or protection.” The bans in the company forced arbitration clauses, the employees argued, violated that long-standing labor law guarantee, and were thereby unlawful and unenforceable under the FAA’s “savings clause.”

 

Question Before The Court: Whether arbitration clauses with individual employees that bar workers from pursuing work-related claims on a class, collective, or joint basis in any forum are illegal because they limit the employees’ right under the NLRA and NLGA to engage in “concerted activities” in pursuit of their “mutual aid or protection,” and are therefore illegal and unenforceable under the Federal Arbitration Act’s (FAA) “saving clause.”

 

The Opinion: The U.S. Supreme Court held that the FAA requires collective action bans in employment contracts to be enforced. In so finding, the Court determined that the NLRA did not apply in the case before it because, in its view, the NLRA was designed to serve as a mechanism for workers to organize a union in their workplace. The Court ruled that the workers’ rights to act collectively for “mutual benefit or protection” does not extend to collective legal action. The FAA’s “savings clause” provides that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” The Court reasoned that, since the NLRA didn’t protect a right to collective legal action, class bans in forced arbitration clauses limiting workers’ ability to band together against a more-powerful employer are not illegal, and, by extension, the saving clause did not apply. It further asserted that even were the illegality defense available, it still could not be applied because doing so would impermissibly “disfavor arbitration”—an attitude the Court ruled intolerable in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) just a few years prior when it reiterated its position that it is impermissible for states or courts to try to render arbitration contracts unenforceable for public policy reasons.

 

In reaching its holding, the majority expressed open disdain toward the employees’ effort to retain their right to band together. It portrayed the illegality defense asserted by the workers as an attempt to “attack the individualized nature of the arbitration proceedings,” and claimed that the employees’ demand to enforce their rights collectively was really intended to “interfere with one of arbitration’s fundamental attributes.” In making this point, the Court ignored the fact that the attributes it was holding up as sacrosanct had only been used to characterize arbitration proceedings for less than a decade and were wholly a product of the Court’s own recent decisions—observations that Justice Ruth Bader Ginsberg pointed out in her scathing dissent.

 

The full repercussions of this opinion have yet to be felt. Time will tell what this case will mean for workers who seek to avail themselves of the “mutual aid or protection clause” of the NLRA in the future; and the winnowing of the FAA “savings clause” in this opinion creates doubt as to how an employee may use the provision to defend against forced arbitration moving forward. One thing is certain: as a result of this decision, the number of employers who use class and collective action bans in their forced arbitration clauses will increase, and, as a result, millions of wronged employees will be deprived of any meaningful way to challenge unlawful abuse in the workplace.

© 2016 Employees Rights Advocacy. All Rights Reserved.