Supreme Court Updates Employment Law in America With Major Ruling
June 27th, 2018 by David Minces
One of the most important laws that shapes American employment law, the Federal Arbitration Act of 1925 (FAA), was instrumental in encouraging the establishment of arbitration in today’s legal system. Arbitration is a form of alternative dispute resolution where an arbitrator, an impartial third party, decides the outcome of a case, rather than a judge. While arbitration is settled outside of courts, the decisions made in them are legally binding. The FAA was so groundbreaking because it legally allowed for contracts that make arbitration compulsory, preventing one party from being able to take matters to court at a later date.
The FAA did not always have such a great influence on employment law. In the past, many believed that it did not even apply to employment contracts, and its applications were mainly focused in consumer law. However, seventy-six years after the FAA was passed, on May 21, 2001, the Supreme Court offered a major clarification on the FAA. In their ruling on Circuit City Stores, Inc. v. Adams, the SCOTUS decided that the law also applies to employment contracts.
Just last month, another Supreme Court case made a major update to the FAA. The case Epic Systems Corp. v. Lewis decided whether the FAA protects contracts that require individual arbitration and waive class and collective proceedings. The main question was whether this violated the National Labor Relations Act of 1935, which protects workers’ rights to organize in order to collectively bargain in disputes against their employers. This case’s outcome has major implications that affects millions of American workers.
Background on case
Jacob Lewis worked for Epic Systems, a healthcare software company, as a technical writer. In April 2014, he signed an agreement to arbitrate wage-and-hour claims on an individual basis. This waived his ability to participate in class, collective, and representative proceedings. However, in February 2015, Lewis sued Epic Systems on behalf of himself and other technical writers for misclassifying them as exempt employees and depriving them of overtime pay in violation of the Fair Labor Standards Act (FLSA). Epic Systems moved to dismiss the case because of the arbitration agreement, which waived the right to class action. However, the Seventh Circuit sided with Lewis, ruling that mandatory individual arbitration violated the National Labor Relations Act. Epic Systems petitioned the Supreme Court, which took up the case, now known as Epic Systems Corp. v. Lewis. This case was consolidated with Ernst & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil USA, Inc., both of which focus on the same issue.
The Supreme Court’s newest member, Justice Neil Gorsuch, is strongly supportive of the Federal Arbitration Act. During his nomination hearing last year, he said that the act makes judgement “quicker, cheaper, easier for the people.” Thus, it was not a surprise when the Supreme Court ruled 5-4 in favor of Epic Systems. Gorsuch wrote the majority opinion and was joined by Justices John Roberts, Anthony Kennedy, Clarence Thomas, and Samuel Alito. Justice Thomas wrote a concurring opinion. Dissenting from the majority opinion was Justice Ruth Bader Ginsburg, who was joined by Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan.
Implications of ruling
This case will obviously have a major impact on the application of the Federal Arbitration Act and the millions of American employees affected by it. According to the Economic Policy Institute, 60.1 million workers are employed with mandatory arbitration clauses and 24.7 million of those have class action waivers. This case may alter the employment contracts of millions of Americans. Additionally, one of the side effects of this case will be defining the legal scope of the National Labor Relations Act as well. By siding with the petitioner, the Supreme Court has indicated its support for a narrow reading of the NLRA. The NLRA will now be interpreted as protecting only employee collective action in the form of self organization, association with labor unions, and collective bargaining.
Epic Systems Corp. v. Lewis will give the employment law field a unique set of benefits and challenges. Minces PLLC is dedicated to staying updated on the changing landscape of employment law so that we can get our clients the best possible outcomes.
Comments are closed.