The Supreme Court sided with a worker over a corporation in a case involving the Federal Arbitration Act on Tuesday. For those unfamiliar with the Court’s arbitration decisions, that happens about as often as a unicorn wins the Powerball lottery while simultaneously being struck by lightning.
And, as further evidence that Beelzebub awoke this morning to discover thick layer of snow on his lawn, the Supreme Court’s decision in New Prime v. Oliveira was written by Neil Gorsuch — the author of a decision holding that the Arbitration Act permits employers to engage in small-scale wage theft with impunity.
As Slate’s Mark Joseph Stern writes, New Prime “marks the triumph of the Gorsuch brief—a highly technical argument designed to nab the justice’s vote by fixating on the text of a statute and its meaning at the time of passage.” But it is also a hollow triumph. New Prime is an important case because it is one of a few rare examples where this Supreme Court read the Arbitration Act consistently with its explicit text, but it also dealt with a fairly minor issue that carves out a narrow exception to the Court’s decisions enabling wage theft.
In Epic Systems v. Lewis, a much more significant wage theft decision that Gorsuch penned last year, Gorsuch blithely ignored the text of the Arbitration Act — while simultaneously holding that his atextual reading of the Arbitration Act trumps the explicit language of a law enacted to protect workers’ collective action.
Read together, New Prime and Epic Systems show that Gorsuch is willing to follow the text of a statute to liberal outcomes when those outcomes do not significantly burden big business. But when the stakes are high, Gorsuch is happy to set aside the law’s text to serve ideological goals.
Indeed, the reasoning Gorsuch deploys in New Prime is so inconsistent with Epic Systems — and with many of the Court’s arbitration decisions from the last two decades — that a lower court could plausibly argue that New Prime represents a sea change in the Court’s jurisprudence that justifies taking the law in an entirely different direction. There’s little chance that this Supreme Court would endorse such a project. But if Gorsuch wants to be taken seriously as a judge who places the text of the law before his personal politics, he will need to overrule much of the Court’s prior work.
Enabling wage theft
The Federal Arbitration Act is a nearly century-old law that, as Justice Ruth Bader Ginsburg explained in 2015 dissent, was intended to enable “merchants with relatively
equal bargaining power” to resolve disputes before a private arbitrator rather than through potentially costlier litigation.
Beginning in the 1980s, the Supreme Court started to read the Arbitration Act to allow large companies to force much weaker individuals to sign away their right to sue that company as a condition of doing business with it. Some of these decisions were arguably consistent with the law’s text. But two of the Court’s most significant arbitration decisions did such violence to the statute that it’s easy to suspect that the justices in the majority acted in bad faith.
These decisions, moreover, had devastating impacts on workers. As the Economic Policy Institute demonstrated in a 2016 report, arbitrators are significantly more likely than judges to favor employers over workers. And, in the rare cases where workers do prevail before an arbitrator, such workers receive significantly less money.
Under the Arbitration Act’s plain text, most employment disputes shouldn’t even be heard by arbitrators in the first place. Often, workers are forced into arbitration after their employers inform them that they must either sign away their right to sue their bosses or immediately lose their jobs. In some cases, workers are even forced to agree to arbitration as a condition of applying for a job. Thus, many workers are forced to choose between giving up their legal rights and unemployment.
The Arbitration Act requires courts to honor contracts mandating arbitration, but it also contains an exception for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Nevertheless, in Circuit City v. Adams, a 5-4 Supreme Court held that the Arbitration Act applies to contracts of employment involving workers engaged in foreign or interstate commerce.
Circuit City reached this holding by twisting two interlocking provisions of the Arbitration Act. The first was the provision quoted above, which exempts workers engaged in interstate commerce. The second is a provision of the law establishing that the Arbitration Act only applies to “a written provision in any maritime transaction or a contract evidencing a transaction involving commerce.”
The Court’s understanding of the word “commerce” evolved significantly over the last century or more. In Hammer v. Dagenhart, a 1918 decision striking down a federal ban on child labor, the Supreme Court read the word “commerce” very narrowly to exclude nearly all employment contracts. Two decades later, the Court read “commerce” more expansively to encompass nearly all employment contracts.
The Arbitration Act was enacted in 1925, when Dagenhart was still good law. So the word “commerce” should be read in that statute the way it was understood in 1925. That is, when the Arbitration Act states that it only applies to “a written provision in any maritime transaction or a contract evidencing a transaction involving commerce” that should indicate that nearly all employment contracts are beyond the scope of the Act.
Alternatively, the Supreme Court could have read the word “commerce” using the modern definition of that term. But that would have meant that, when the Arbitration Act states that “workers engaged in foreign or interstate commerce” are exempt, that exemption should be read expansively to exempt pretty much all workers.
Yet, instead of reading the word “commerce” consistently throughout the statute, Circuit City held that the word should be read expansively in the provision laying out of the scope of the Arbitration Act, but that it also should be read narrowly in the provision laying out the exemption for workers. That’s an utterly bizarre way to read a statute. When the same word appears twice in the same Act of Congress, courts presume that Congress intended for the word to have the same meaning throughout unless there is very strong evidence to the contrary.
The Court compounded its error AT&T Mobility v. Concepcion, which held that forced arbitration agreements may also include a provision prohibiting individuals from joining a class action lawsuit against the company that drafted the agreement. The Court did so, moreover, despite the fact that the Arbitration Act makes no mention whatsoever of class actions.
The practical impact of Concepcion is that large companies can now effectively rob their customers and workers, so long as they do so only a few dollars at a time. The Concepcion case itself involved an allegation that a cell phone company unlawfully charged many of its customers $30.22. Class actions allow all of these customers to join together in a single lawsuit — and hire a single team of lawyers to litigate that lawsuit. Without class actions, however, virtually no one will sue the company because the cost of litigating a $30.22 lawsuit will be a whole lot more than $30.22.
Thus, the choice between a class actions and no class actions is not the choice between one lawsuit or thousands of individual lawsuits. It is the choice between one lawsuit and zero lawsuits.
Gorsuch’s Epic Systems decision effectively combined the Court’s decisions in Circuit City and Concepcion. It held, contrary to the text of the Arbitration Act, that workers engaged in foreign or interstate commerce may be forced into arbitration agreements. And it held, despite no language whatsoever in the Arbitration Act which supports such a result, that workers can also be forced to sign away their right to bring a class action.
Epic Systems did so, moreover, despite the fact that the National Labor Relations Act provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
Joining together in a class action is a concerted activity that workers engage in for their own “mutual aid or protection.” Yet Gorsuch determined in Epic Systems that the Court’s atextual decisions in Circuit City and Concepcion trump the explicit text of the National Labor Relations Act.
The Court gets one right
In light of this history, the Court’s unanimous, pro-worker decision in New Prime is surprising, not because there’s any question that it is correct, but because the Court so often ignores the law in arbitration cases that it is odd to seem them pay attention to it.
New Prime involved Dominic Oliveira, a trucker who alleges that he was paid less than the legally required minimum wage. Much of this dispute hinges on whether Oliveira was properly classified as a “contractor” — and thus outside the scope of minimum wage laws — or whether he should have been classified as an “employee” who should receive the minimum wage.
Like many workers, the trucking company made Oliveira sign a forced arbitration agreement. Yet, recall that the Arbitration Act exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Even under the very narrow definition of the word “commerce” embraced by decisions like Hammer v. Dagenhardt, a trucker counts as a worker “engaged in foreign or interstate commerce.” So Oliveira should have been safe from the Arbitration Act.
And yet the trucking company still claimed that Oliveira was bound by the forced arbitration agreement. It even claimed that the threshold question of whether or not Oliveira is bound by this agreement must be decided by an arbitrator.
According to the company, the Arbitration Act’s exemption for workers engaged in commerce only applies to “contracts of employment.” But, if Oliveira was merely a contractor and not an employee, he did not have a contract of employment, and therefore could be forced into arbitration.
In any event, the Supreme Court rejected the trucking company’s confusing and convoluted claim. In 1925, when the Arbitration Act became law, “all work was treated as employment, whether or not the common law criteria for a master-servant relationship happened to be satisfied.” Thus, it didn’t matter whether Oliveira is an “employee” or a “contractor.” So long as he agreed to work for the trucking company, his agreement to work is a “contract of employment.”
Gorsuch began his analysis with a broad claim. “It’s a ‘fundamental canon of statutory construction,’” he wrote, quoting from a recent Court decision, “that words generally should be ‘interpreted as taking their ordinary . . . meaning . . . at the time Congress enacted the statute.’” Thus, New Prime turned on what the words “contracts of employment” meant in 1925. And since those words had an expansive meaning then, they should be given an expansive meaning today.
It’s a perfectly sound legal argument. But if you’ve read this far through this deep dive into federal arbitration law, you should immediately spot the implications of Gorsuch’s “fundamental canon of statutory construction.” If the words of the Federal Arbitration Act must be read as they were originally understood in 1925, then the word “commerce” must be read as Congress would have understood it in 1925. That means that Circuit City was wrongly decided. And it means that all workers should be exempt from the Arbitration Act.
In fairness, there is one legal principle supporting Gorsuch’s opinion in Epic Systems — the principle of stare decisis.
Broadly speaking, stare decisis, means that judges should be very reluctant to cast aside old precedents. In cases involving federal statutes, moreover, judges are even more reluctant to overrule precedents — on the theory that if Congress didn’t like the old precedent, it could have passed a new law overturning it.
Thus, Epic Systems can be read as an application of stare decisis. Whatever the law should have been when Circuit City and Concepcion reached the Court, those cases are on the books now, and the Court should be reluctant to overrule them.
But the problem with this argument is that Gorsuch emphatically does not believe in stare decisis.
Consider Gorsuch’s approach in Perry v. Merit Systems Protection Board. Perry involved a mind-numbingly opaque statute governing where certain complaints by federal employees must be filed. The statute is so poorly drafted that, during oral arguments in Perry, Justice Samuel Alito wondered if it was drafted by “somebody who takes pleasure out of pulling the wings off flies.”
Ultimately, seven justices, in an opinion by Justice Ginsburg, held that the disputes at issue in Perry should be filed in a federal district court. Gorsuch authored a dissent, joined only by Justice Clarence Thomas, arguing that these disputes should be filed in the Merit Systems Protection Board. Ginsburg’s opinion largely relied on past precedents.
Yet, both in the Perry oral argument and in his dissent, Gorsuch not only appeared convinced these prior precedents got the law wrong, he openly mocked the idea that the Court should continue to follow erroneous precedents. “At the end of a long day, I just cannot find anything preventing us from applying the statute as written,” Gorsuch proclaimed in his dissent, “or heard any good reason for deviating from its terms.”
“Congress already wrote a perfectly good law,” he added. “I would follow it.”
The point here is not that Ginsburg was right, and that Gorsuch was wrong, about how the statute should be read. Gorsuch may be the only lawyer on the planet who thinks he is certain how this sadistic statute should be read. Rather, the point is that Gorsuch was completely unmoved by prior precedents in his Perry dissent.
Gorsuch’s dissent stands for the proposition that laws should always be read as they are written (or, at least, as Neil Gorsuch thinks that they are written) regardless of what other judges have said in the past. It is a direct attack on the principle of stare decisis.
Yet, if Gorsuch had applied that principle in Epic Systems, he would have overruled Circuit City. There is simply no way to square the holding in Circuit City with Gorsuch’s statement in New Prime that the words of a statute generally should be read as they were understood “at the time Congress enacted the statute.”
The picture that emerges from Gorsuch’s opinions, in other words, paints him as a man of very flexible morality. He adheres to stare decisis, except when he smugly mocks his colleagues for doing the same. He is a loyal textualist in small cases, but doesn’t give a damn about what the law says in major disputes.
Ultimately, Mr. Gorsuch needs to make a decision. Is he a judge, or is he an ideologue? Does he believe, as he often claims, that the only way to read legal texts is to interpret the words the way they would have been understood when they were written, or will he ignore this principle whenever powerful conservative interest groups have too much at stake?
Gorsuch could prove his critics wrong by writing an opinion explaining why his own opinion in Epic Systems must be overruled — indeed, he could copy much of that opinion from what he wrote in New Prime. Until he does so, however, the notion that he is a neutral judge who merely applies the law is impossible to take seriously.