The Supreme Court held on Monday that employers can force their employees to sign away many of their rights to sue their employers. As a practical matter, Monday’s decision in Epic Systems v. Lewis will enable employers to engage in small-scale wage theft with impunity, so long as they spread the impact of this theft among many employees.
Neil Gorsuch, who occupies the seat that Senate Republicans held open for a year until Donald Trump could fill it, wrote the Court’s 5-4 decision. The Court split along party lines.
Epic Systems involves three consolidated cases, each involving employment contracts cutting off employees’ rights to sue their employer in a court of law. In at least one of these cases, the employees were required to sign away these rights as a condition of starting their job. In another, existing workers were told to sign away their rights if they wanted to keep working.
Each contract contained two provisions, a “forced arbitration” provision, which requires legal disputes between the employer and the employee to be resolved by a private arbitrator and not by a real court; and a provision prohibiting employees from bringing class actions against the employer.
Writing with his trademarked smugness, Gorsuch presents Epic Systems as a simple application of a legal text. “The parties before us contracted for arbitration,” he writes. “They proceeded to specify the rules that would govern their arbitrations, indicating their intention to use individualized rather than class or collective action procedures. And this much the Arbitration Act seems to protect pretty absolutely.”
It’s the sort of statement someone might write if they’d never read the Federal Arbitration Act — the law at the heart of this case — and had only read the Supreme Court’s decisions expanding that act’s scope.
Broadly speaking, the Federal Arbitration Act requires courts to honor arbitration agreements, and to ignore legal doctrines that disfavor arbitration as a method of resolving disputes. Yet the Act also exempts “workers engaged in foreign or interstate commerce.”
Nevertheless, in a 5-4 decision in Circuit City v. Adams, the Supreme Court held that the Act applies to most workers engaged in foreign or interstate commerce. If Gorsuch were concerned with the text of the Arbitration Act, he might have called for additional briefing on whether Circuit City should be overruled. Instead, he compounded the Court’s error in Circuit City — all while insisting that an anti-worker outcome is required by the law’s text.
Similarly, the Federal Arbitration Act says nothing about class actions. And it certainly does not contain any language suggesting that courts must give the same special treatment to contracts banning class actions that it gives to contracts mandating arbitration.
Nevertheless, in its 2011 decision in AT&T Mobility v. Concepcion, the Supreme Court held that the Federal Arbitration Act has penumbras, formed by emanations from its guarantees that give it life and substance, and that these penumbras prevent states from banning no class action clauses in arbitration agreements.
Permitting someone to bring a class action before an arbitrator, Justice Antonin Scalia wrote for the Court in Concepcion, would “sacrific[e] the principal advantage of arbitration—its informality—and mak[e] the process slower, more costly, and more likely to generate procedural morass than final judgment.” That was a policy judgment on Scalia’s party. It wasn’t a decision rooted in the text of the Arbitration Act.
Epic Systems effectively combines the holding of Circuit City with that in Concepcion — holding that forced arbitration agreements with class action bans may be used to restrict workers’ rights. It does so, moreover, despite the fact that a provision of 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.”
Class actions are a form of concerted activity for mutual aid or protection. In the typical class action, a group of individuals with a common claim against the same defendant join together in a single lawsuit. This enables them to resolve their case efficiently through one round of litigation rather than dozens or hundreds. It also enables plaintiffs with very small claims to obtain competent legal counsel willing to take on their case.
Consider a hypothetical ThinkProgress presented shortly before the Court heard the Epic Systems case:
If an employer cheats one employee out of $300,000 worth of wages, for example, that employee is likely to be able to find a lawyer who will take his case on a contingency basis — meaning that the lawyer gets a percentage of what the employee collects from the employer if they win. If the same employer cheats 10,000 employees out of $30 each, however, no lawyer is going to represent any one of these workers on a contingency basis. Plus, few employees are likely to bother with a $30 suit. It’s too much hassle, and too expensive to hire a lawyer who won’t work on contingency. The solution to this problem is a class action suit, which allows the 10,000 employees to join together in a single case litigated by a single legal team.
Epic Systems means that employers who cheat a single employee out of a great deal of money will probably be held accountable for their actions — though it is worth noting that arbitrators are more likely to favor employers than courts of law, and that they typically award less money to employees when those employees do prevail. The biggest losers under Epic Systems, however, will be the victims of widespread, but small-scale, wage theft.
The lesson for employers, in other words, is to go ahead and cheat your workers. Just make sure you spread the theft widely among as many employees as possible, and that you don’t take too much from any one person.