I recently posted (twice) about the Supreme Court’s decision in Epic Systems v. Lewis. Here are some suggestions about how to deal with it. I am pretty sure that Congress (at least as constituted) is not going to legislatively overrule this. Even if they did I have no doubt that our President would veto it. There are some actions that states and municipalities can take.
The Arbitration Fight Isn’t Over
How states can counteract the Supreme Court’s awful ruling in Epic Systems v. Lewis.
The Supreme Court held on Monday that lower courts must enforce individual arbitration clauses in employment contracts—a ruling that effectively allows companies to compel workers to pursue employment-related claims in one-on-one closed-door proceedings that are not subject to substantive judicial review. Union leaders and other workers’ rights activists are understandably dismayed by the 5–4 result in Epic Systems v. Lewis, which is the latest in a line of Supreme Court decisions extending the 1925 Federal Arbitration Act far beyond its original scope. But this week’s loss need not spell the end of the effort to protect workers from the effects of the most onerous arbitration clauses. Instead, it shifts the focus from the national level to the states.
Under other circumstances, the logical response to a decision like this one would be to lobby Congress to change the law. To that end, Justice Ruth Bader Ginsburg—joined in dissent by three of her colleagues—wrote that “[c]ongressional correction” of the court’s “egregiously wrong” decision is “urgently in order.” Richard Trumka, president of the AFL-CIO, likewise said that Congress should “immediately enact” legislation that overrides the Epic Systems ruling. But that sense of immediacy is likely to be lost on a Congress that so far has been more interested in rolling back workplace protections and clearing the way for greater use of arbitration provisions than in standing up for workers’ interests. And in the unlikely event that Congress does pass legislation to undo Monday’s decision, the bill will likely die on the desk of President Donald Trump, whose administration has gone out of its way to support employers seeking to enforce individual arbitration clauses.
If Congress won’t act, states and localities can and should. Subnational governments have several policy tools they can use to counteract some of the most pernicious consequences of individual arbitration mandates. Governors, state lawmakers, mayors, and city council members can take concrete steps in the coming months to protect their constituents from the fallout of Monday’s decision. And workers’ rights advocates ought to demand action from their state and local leaders.
In a world in which labor markets were perfectly competitive and workers had full information about arbitration provisions, the decision in Epic Systems would not be a cause for much concern. Some employees might choose to give up their rights to bring workplace-related claims collectively in exchange for higher wages or other benefits. If that were the case, then courts would and should respect these consensual and mutually beneficial bargains. But alas, that is not our world. Mounting evidence indicates that many employers enjoy “monopsony” power in the labor market—that is, they have the power to dictate wages and working conditions. Under those circumstances, the protections afforded by labor law become even more important. Individual arbitration clauses undermine those protections.
The Epic Systems case involved claims under the Fair Labor Standards Act, which establishes the federal minimum wage and overtime rules. FLSA provides an excellent illustration of individual arbitration’s worrying consequences. Under the lower court’s decision in Epic Systems, low-wage workers who had been paid less than the federal minimum or who hadn’t been adequately compensated for overtime could band together to bring their claims collectively. Now, whenever an employer inserts an arbitration clause into an employment agreement, each employee will have to proceed pro se or find her own lawyer to pursue a claim that, on its own, might amount to only a few hundred dollars. A prevailing plaintiff may be able to recover attorneys’ fees but could still be on the hook for expert witness expenses. And an unsuccessful plaintiff—and/or her attorney—will have to bear litigation expenses herself.
The likely result will be weaker enforcement of wage and hour laws. But the implications of Epic Systems extend to other areas of employment law as well. Individual arbitration clauses prevent workers from joining together to bring sexual harassment claims. They also stop employees from asserting other sex and race discrimination claims in court or in classwide arbitration proceedings.
What can states and localities do to change this? One thing they clearly cannot do under existing Supreme Court doctrine is impose a flat-out ban on individual arbitration clauses in employment contracts. The court has said that “[w]hen state law prohibits outright the arbitration of a particular type of claim,” the state law is “preempted” (i.e., overridden) by the Federal Arbitration Act. To be sure, the FAA by its own terms does not apply to employment contracts, but that ship has sailed, and all members of the court now accept as a matter of precedent that the law applies to employment contracts outside the transportation industry. (Sailors, railroad employees, and other transportation workers are still exempt from the FAA’s reach.)