A Business-Minded Approach To Employment Law

‘Epic Systems,’ and the 3rd Circuit’s Ruling on Class Waivers

On Behalf of | Jun 26, 2018 | Employment Contracts, Employment Disputes |

The Supreme Court recently made an epic decision regarding employee’s rights. In a 5-4 ruling on May 21, the 3rd circuit found in favor of the employer in the case of Epic Systems Corp. v. Lewis. The decision supports employers’ right to force employees to settle their disputes via individual arbitration.

As a result of this decision, employees who have signed contracts with arbitration clauses will be unable to pursue labor disputes through the public court system. In addition, if the clause requires individual action, employees are unable to band together to address a common complaint.

The ruling required a deep dive into Federal laws currently on the books, including the National Labor Relations Act and the Federal Arbitration Act.

Examining the Current Federal Laws

The National Labor Relations Act of 1935 protects worker’s rights to collective action in the pursuit of workplace violations. However, the Federal Arbitration Act, which was written ten years earlier in 1925, requires courts to acknowledge and respect written arbitration agreements and the results of any proceedings, as long as they don’t create any law violations.

In speaking for the majority, Justice Neil Gorsuch states the decision was based on the interpretation that the National Labor Relations Act was intended to protect union’s rights to collective bargaining. The terms of the act do not apply to class-action lawsuits by employees. This is a major win for employers, who add arbitration clauses to their contracts to avoid frivolous and costly lawsuits.

Those opposed to the ruling believe it unfairly limits employees’ rights to pursue legal action against employers for labor violations. Justice Ruth Bader Ginsburg’s dissenting opinion argues the law was actually intended to provide a far more encompassing level of employee protection, giving employees collective action rights regardless of whether or not they are union members.

There are several key points to the case, with valid arguments presented on both sides.

Binding Legal Contract

Supporters of the decision argue that those who sign an arbitration agreement do so of their own free will, and therefore should be bound to the terms of the contract they signed. If a prospective employee does not wish to be bound to the agreement, he or she can simply pass on the opportunity and pursue employment elsewhere.

The opposition counter-argues that the majority of employment contracts now contain arbitration clauses, making it extremely difficult for those who need employment to avoid signing such contracts. They hold that this ruling unfairly gives employers the “upper-hand.”

Individual vs. Class-Action Complaints

Those opposed to the ruling argue that the inability for employees to band together and share legal expenses may make pursuing action cost-prohibitive.

Furthermore, in cases of public class-action suits, the publicity that often results may be enough to deter employers from engaging in violations in the first place. Requiring private arbitration removes this deterrent, once again putting employers in a position to take advantage of employees with little fear of repercussion.

Is Arbitration Fair?

Critics contend that employees pushed into arbitration are at the mercy of private decision-makers, who are often hired by the employers. A trial held in the public court system gives employees a greater chance for a fair ruling.

Supporters counter-argue argue that arbitration is not a new concept, and it’s been proven to give employees a “fair forum” to settle their disputes.

The Bottom Line

For now, it appears that arbitration agreements contained within employment contracts will be upheld as written, as long as they don’t violate any other laws. If in doubt, it’s always a good idea to have your contracts reviewed by a legal professional.