By a narrow margin, the U.S. Supreme Court has undone a longstanding protection for employees — part of the New Deal, no less. In his Epic Systems opinion, Judge Neil Gorsuch stands idle as corporations strip tens of millions of workers not only of access to the courts, but also of each other's aid even in forced arbitration. Congress must step in, but employees may have a few options while they wait.
This expert analysis by TELG managing principal R. Scott Oswald was published by Law360 on May 21, 2018.
In Epic Systems, Gorsuch Returns Workers to Like-It-or-Lump-It Era
By R. Scott Oswald
With Justice Neil Gorsuch’s majority opinion today in Epic Systems Corp. v. Lewis, the U.S. Supreme Court revives a toxic idea that was common in workplace law before the New Deal: The fiction that an individual employee’s waiver of rights in an employment agreement, including the right to join other workers in legal actions, is a voluntary tradeoff — not an illegal power grab by the employer at its time of maximum leverage.
Barring a much-needed fix from Congress, and except in situations where unions still have sway, employees now may be forced to pursue justice by themselves on the tilted field of arbitration — even when they have endured injustice as a group.
The result must be at least threefold:
- A gradual dwindling of concerted legal actions by employees in all forums, as more employers make individual arbitration a Gorsuch-blessed job requirement;
- A rise in attacks on the validity of specific arbitration agreements, especially under state law as unconscionable contracts of adhesion; and
- A systematic testing in lower courts of whether this harsh new landscape extends to claims that cannot be pursued individually as a practical matter, such as disparate-impact discrimination claims. (Surely not — but as of today, who knows?)
Meanwhile, a furious dissent from Justice Ruth Bader Ginsburg, which she read from the bench while wearing her “dissent jabot,” blasted Justice Gorsuch’s opinion as “egregiously wrong” and set the stage for more acrimonious arbitration battles at the Court this fall in New Prime Inc. v. Oliveira and Lamps Plus Inc. v. Varela.
The onward march of forced arbitration is distressing for workers, but today’s 5-4 decision at least clarified the stakes for employees in next two national elections, and may even inspire an uptick in union organization. It highlighted the need, too, for a stronger popular understanding of what’s fair and unfair in employment contracts — perhaps via a letter-grade system that allows big corporations to compete in a tight job market based on employee rights, not just employee benefits.
Willful Blindness to Reality
From its very first line, Justice Gorsuch’s opinion in Epic Systems showed his readiness to load the dice. “Should employees and employers be allowed to agree,” he asked, rhetorically, “that any disputes between them will be resolved through one-on-one arbitration?”
Perhaps that would be the question, if employees had the option of working without such an “agreement.” But when one-on-one arbitration is an ironclad condition of employment, employers offer only what Justice Ginsburg properly called a Hobson’s choice — which is to say, no choice at all.
Justice Gorsuch walked a tortuous path to his inevitably affirmative answer, holding that the National Labor Relations Act (NLRA) doesn’t grant employees an unwaivable right to act collectively in the legal arena, or perhaps any rights in that arena at all — and that anyhow, the NLRA’s wording can’t support the displacement of the earlier-enacted Federal Arbitration Act (FAA).
The FAA, signed by Calvin Coolidge in 1925, recently has become a superweapon for the U.S. Chamber of Commerce and its corporate constituency, allowing them to circumvent hard-won protections for employees and consumers with just a few sentences of take-it-or-leave it boilerplate and the illusion of a voluntary contract. In this context, Justice Gorsuch’s opinion was perhaps just the fruit of other badly decided cases dating back at least to Circuit City Stores in 2001 — when Justice Anthony Kennedy held, in another 5-4 opinion, that employment contracts weren’t immune from the FAA — and arguably all the way back to the 1980s.
Still, even as he leaned on such precedent, Justice Gorsuch appeared cold to the weight of labor history he was bucking, and to the huge stakes of protective statutes such as the NLRA. The ghost of Antonin Scalia, it seemed, steeled him as he declared Congressional intent to be irrelevant: “[L]egislative history is not the law.”
It fell to Justice Ginsburg’s dissent, therefore, to invoke what Justice Stephen Breyer called, in oral arguments for this case, the “heart of the New Deal.”
Will a Yellow Dog Still Hunt?
At 30 pages, Justice Ginsburg’s dissent was notably longer than the 25-page majority opinion. It told the story behind the statutes such as the NLRA, a story of the disproportionate power that employers once wielded over individual employees — and of a legislative scheme to fix that imbalance by enlisting the power of federal courts and by allowing workers to band together.
As Justice Ginsburg noted, employers’ rallying cry before the Great Depression had been “liberty of contract.” If workers signed away their rights — to join a union, for instance — who were Congress and the courts to interfere? But such “liberty” was wholly one-sided, and the resulting “yellow dog contracts” were reviled as coercive and unfair. The NLRA aimed to eliminate them.
The putative agreements in Epic Systems and its two consolidated cases, said Justice Ginsburg, strongly echo those of the yellow dog era. As an example, she cited the actions of Epic Systems, a Wisconsin-based software developer that e-mailed its employees an “agreement” in which they surrendered any right to collective legal action — and said, in essence, that anyone who disagreed should quit.
Such demands used to be rare: In 1992, only 2 percent of non-union companies required arbitration for the settlement of disputes. Today, emboldened by the Supreme Court’s embrace of the FAA, more than half do so. Among these, the proportion of agreements that prohibit class arbitration has doubled in just the last few years, so that individual arbitration — impractical for employees in many cases — is the only remaining channel for legal disputes for about 25 million workers.
Without a doubt, the ban on class actions will continue to spread quickly. The FAA is the new, undead face of “liberty of contract.” It seems stoppable, today, only by an act of U.S. Congress — which, in turn, seems to require a new Congress.
Remaining Options for Employees
What can employees do to protect their options? Some claims cannot easily be pursued individually, and it is hard to imagine that this Court — even steeled by Justice Scalia’s ghost — will force groups of employees to waive collective action for discrimination under statutes such as Title VII of the Civil Rights Act of 1964. That remains to be seen, however, and some brave groups must litigate the matter.
In the meantime, state contract law must become a larger battleground: Depriving employees of collective action is unconscionable from a public policy perspective, regardless of whether the Supreme Court says it violates the NLRA, as any number of states should agree.
And we can’t neglect the power of naming and shaming. Consumers and employees alike may shun companies for their unethical business practices — and restricting employees’ rights in order to enforce secrecy and increase profit is an unethical practice, make no mistake.
In today’s tight labor market, employers ought to be touting their respect for employee rights. Beyond shaming, we can honor those who set an example. What company will disavow the new “Gorsuch option”? It’s time to step up.
R. Scott Oswald is managing principal of The Employment Law Group, P.C., which is based in Washington, D.C. He represents employees in disputes with their employers, but he was not involved in Epic Systems Corp. v. Lewis or its consolidated cases.
(Note: This version has been edited slightly from the version published by Law360, and carries a different headline.)