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Supreme Court case threatens to set back workers’ rights by 80 years

Roger Parloff
Roger Parloff

Update: On Monday, May 21, the Supreme Court handed down a 5-4 decision siding with the employers in this case.

Kicking off its new term with a splash, the U.S. Supreme Court will hear a trio of cases Monday that threaten to set back workers’ rights by more than 80 years, labor-side employment lawyers claim.

The suits, known as Epic Systems Corp. v. Lewis, pose the question of whether employers can force employees, as a condition of employment, to agree to submit almost any federal legal claim they have against the company to individual arbitration, effectively waiving their right to bring class actions or other joint legal proceedings.

The specific employers involved in the cases before the court are Epic Systems, which makes healthcare-related software; Murphy Oil (MUR), which runs more than a thousand gas stations in 21 states; and accounting giant Ernst & Young. Like a rapidly growing number of U.S. employers, they require nearly all their workers, as a condition of employment (or of even filing a job application), to sign arbitration clauses that include class-action waivers.

As unions have lost strength in the country, class actions have gained importance as a key means of vindicating employee rights, whether with respect to wage and hours claims or race, age, and sex discrimination. So if employers win a simple way to knock that weapon out of workers’ hands, that will be a big deal.

“This is probably the most important employment, civil rights, or labor case I can remember,” says Cliff Palefsky, who is co-counsel on an amicus brief for 10 major labor unions, including the Service Employees International Union and International Brotherhood of Teamsters.

The late Justice Antonin Scalia repeatedly upheld arbitration clauses for consumers. (AP Photo/Kevin Wolf, File)

In a series of opinions in recent years—including three authored between 2011 and 2013 by the late conservative Justice Antonin Scalia—the court has repeatedly ruled that consumers were barred from bringing class actions by arbitration clauses they had signed as a condition of receiving a product or service. The employers in the three cases being heard next week—supported by amicus groups from 17 outside groups, including the U.S. Chamber of Commerce and Business Roundtable—maintain that those precedents dictate the outcome of these employment cases, too.

Also supporting the employers will be the U.S. Department of Justice, which switched sides in these disputes after the Trump administration took office in January. Though it filed a petition last September advancing the pro-employee stance that the National Labor Relations Board has taken on these questions since 2012, the department filed a new brief in June supporting the employers. Monday’s argument will feature the rare spectacle of one federal attorney, Acting Solicitor General Jeffrey Wall, arguing against another, NLRB general counsel Richard Griffin, Jr. (In August CBS News reported that employees at The Trump Organization had been ordered to sign arbitration clauses, including class waivers, as a condition of retaining their jobs. This past Monday, when the U.S. Senate confirmed William Emanuel, President Donald Trump’s second appointee to the NLRB, control of the five-member board passed to Republicans. But it’s unlikely that the board would vote to change its position in this case before the argument.)

Are class actions “concerted activities”?

In the first three years after the court’s pro-arbitration ruling in AT&T Mobility (T) v. Concepcion in 2011, the number of companies using arbitration clauses to preclude employee class actions jumped from 16.1% to 42.7%, according to a survey by Carlton Fields Jorden Burt, a consulting firm that advises employers. A more recent survey, whose results were published just this week by the Economic Policy Institute, reports that 24.7 million private-sector, nonunion employees in the U.S. are now subject to class waivers contained in arbitration clauses.

The employees in these suits are individuals who, notwithstanding having signed arbitration contracts, later filed lawsuits seeking class-action status, claiming that they had been wrongfully denied overtime pay under the Fair Labor Standards Act.

The employees argued that the class waivers they had signed were unenforceable under two federal labor law statutes which protect the rights of employees to engage in “concerted activities.” The Norris LaGuardia Act of 1932 bars employers from requiring employees to sign agreements, known as yellow-dog contracts, that bar them from collective bargaining or “other concerted activities for the purpose of . . . mutual aid and protection.” Similarly, the National Labor Relations Act of 1935 makes it an “unfair labor practice” for companies to “interfere with, restrain, or coerce employees” in the exercise of comparably defined “concerted activities.”

In response, the employers maintain that those labor laws, notwithstanding their broad language, were targeting union-related activities, like picketing, and don’t confer a right to bring class-action suits, a phenomenon that did not become common until the 1960s.

Rather, they insist, courts are obligated to enforce the class waivers within arbitration clauses under the command of the Federal Arbitration Act of 1925, which declares arbitration contracts to be “valid, irrevocable, and enforceable” unless they suffer from a failing (like duress or mutual mistake) that would invalidate them under traditional contract law principles. In its pro-arbitration precedents, the court has said that unless a federal statute incorporates a specific “congressional command” against arbitration—which, the employers contend, neither the Norris LaGuardia Act, the NLRA, nor the Fair Labor Standards Act contains—legal claims brought under it are subject to arbitration.   

“The Court has assessed six federal statutes [in previous rulings],” writes attorney Andrew Pincus in a brief for the Chamber of Commerce, “and found that not one contained the ‘contrary congressional command’ needed to displace the Federal Arbitration Act.”

The federal courts of appeals have split over whether the labor laws forbid class waivers in arbitration contracts, with courts based in New Orleans and St. Louis ruling for employers, while panels in Chicago, San Francisco, and Cincinnati sided with employees.

Though the three specific cases before the court all involve overtime claims under the Fair Labor Standards Act, the precedent that will be created appears likely also to impact class claims brought under the Equal Pay Act, the Family Medical Leave Act, the Age Discrimination in Employment Act, and Title VII of the Civil Rights Act.

Thirty civil-rights advocacy groups, led by the NAACP Legal Defense and Educational Fund, have filed one of the 10 amicus briefs supporting the employees in the case. They warn that if employers win this case, workers may be precluded in the future from seeking court orders against systemic discrimination—a type of relief that has been obtained in the past against such defendants as Coca-Cola (KO), Comcast (CMSA) FedEx (FDX), Morgan Stanley (MS), and Wal-Mart (WMT).  

Concerted activity in the gig economy

Another argument employees advance for treating class actions as a modern form of concerted activity relates to the rise of the so-called Gig Economy. Older forms of collective action, like picketing, are poorly suited to this new world, argues a brief submitted on behalf of Susan Fowler, a former engineer at ride-hailing giant Uber Technologies, while class actions are.

“22% of all workers, and 43% of workers with advanced degrees, work remotely (at least on occasion),” argues Fowler, whose blog account alleging sexual harassment at Uber led to multiple firings and a internal investigation led by former Attorney General Eric Holder. “They are connected to their co-workers, managers, and customers by email, phone, computer networks, and video conferencing,” continues her brief, authored by San Francisco attorney Chris Baker. (Four class-actions against Uber were stayed by the federal appeals court in San Francisco last week pending the Supreme Court’s decision in the Epic Systems cases.)

The only personnel change on the court since its three pro-arbitration rulings earlier this decade—two of which were decided 5-4, on ideological lines—has been the replacement of the late Justice Scalia with Justice Neil Gorsuch, who has said he shares Scalia’s jurisprudential outlook. Accordingly, matters look bleak for the employees unless they can convince one of the other conservative justices—perhaps Justice Anthony Kennedy or Chief Justice John Roberts, Jr.—that, as employment attorney Palefsky puts it in an interview, “employment is different.”

“If you sue over a problem with a cellphone, you don’t need to worry about retaliation,” he says. “But it’s not practical for employees to negotiate for themselves or sue for themselves. You put a target on your chest.”

Still, the safe money has to be on the conservative faction prevailing, and the Court extending its string of pro-arbitration rulings.

Roger Parloff writes about law and business.

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