The U.S. Supreme Court on Monday affirmed that corporations have the right to force employees to sign agreements barring them from settling workplace disputes in court, both individually and in groups.
The case, at which Verona’s Epic Systems is one of several companies at the center, was decided by 5-4 with Justice Neil Gorsuch authoring the majority opinion. Justices John Roberts, Anthony Kennedy, Samuel Alito and Clarence Thomas concurred.
“The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written,” Gorsuch wrote.
Justice Ruth Bader Ginsburg authored the dissenting opinion and delivered it from the bench, calling the majority opinion “egregiously wrong.” She was joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.
“The inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers,” Ginsburg wrote.
The majority opinion drew strong rebukes from labor leaders who said it rolls back workers' rights, significantly limiting workers' recourse in workplace disputes and fortifies the power of corporations over their employees. In addition, they said the ruling is an affirmation for thousands of companies that require employees to sign agreements that force them to settle disputes outside of court.
Here are the specifics of the decision.
What does this ruling mean?
The ruling limits legal recourse for thousands of employees nationwide and affirms the corporate practice of forcing employees to sign agreements that forbid them from filing lawsuits to settle workplace disputes. The agreements are called arbitration agreements and they force employees to settle disputes within a company-controlled panel of people called "arbitrators" rather than in front of a judge.
The agreements have become increasingly common, significantly limiting costs for companies that otherwise have to deal with the legal expenses of employee lawsuits.
The ruling also bars employees from organizing to file class action suits and permits companies, including Epic, to require employees to sign non-disclosure agreements in addition to arbitration agreements.
What is the case about?
The case deals with the wage complaint of Jacob Lewis, a former Epic technical writer. Lewis sued the company in federal court arguing Epic had violated federal and Wisconsin laws by unlawfully depriving him and other technical writers of overtime pay.
Lewis sued Epic after he, along with other writers, was forced to sign such an agreement which would bar him from taking any complaints over his pay or hours to court. Instead, the agreement mandated that Lewis and other employees settle disputes individually, in internal hearings with the company.
The case was brought before the court with cases from two other corporations that dealt with the same legal issue: National Labor Relations Board v. Murphy Oil USA and Ernst & Young LLP v. Morris.
What was the legal conflict of the case?
The case dealt with two federal laws that appeared to conflict: the National Labor Relations Act of 1935, which provides for and encourages employees to collectively bargain and sue over labor disputes, and the Federal Arbitration Act of 1925, which states that arbitration agreements “shall be valid, irrevocable and enforceable.”
In this opinion, the conservative majority of the court decided there was no conflict, that the laws have jurisdiction over separate spheres of labor law.
What did the court’s majority say?
In his opinion, Gorsuch wrote, “far from conflicting, the Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this Court to declare the parties’ agreements unlawful.”
“It is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion. The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. This Court has never read a right to class actions into the NLRA — and for three quarters of a century neither did the National Labor Relations Board.”
The court said that its opinion does not roll back rights embodied in the National Labor Relations Board.
"Those rights stand every bit as strong today as they did yesterday. And rather than revive 'yellow dog' contracts against union organizing that the NLRA outlawed back in 1935, today’s decision merely declines to read into the NLRA a novel right to class action procedures that the Board’s own general counsel disclaimed as recently as 2010,” wrote Gorsuch.
What did the dissenting opinion say?
Justice Ginsburg wrote that the court's opinion was destructive and has significant implications for vulnerable workers.
"As I see it, in relatively recent years, the Court’s Arbitration Act decisions have taken many wrong turns," Ginsburg wrote. "Yet, even accepting the Court’s decisions as they are, nothing compels the destructive result the Court reaches today."
"The probable impact on wage and hours claims of the kind asserted in the cases now before the Court is all too evident. Violations of minimum-wage and overtime laws are widespread. One study estimated that in Chicago, Los Angeles and New York City alone, low-wage workers lose nearly $3 billion in legally owed wages each year,” she wrote.
What did Epic say about the ruling?
Epic Founder and CEO Judy Faulkner said in a statement: “It is important that employers protect an employees’ right to file complaints, while also providing for a fair forum in which those grievances are addressed. When it comes to grievances regarding wages and hours, we believe individual arbitration agreements strike that reasonable balance and are pleased with the court’s decision in support of this.”
The company also offered a statement from former Wisconsin Gov. and Epic board member, Jim Doyle:
“Epic is the unique company that understands its most important assets are its people. Employee-owned and homegrown in the Badger State, they have eschewed the quick and profitable path of outsourcing abroad or acquiring other companies, in favor of investing over 80 percent of their operating costs in their people," Doyle said.
What are the next steps for former Epic employee Jacob Lewis?
According to his attorney, David Zoeller, Lewis' individual case will now go back to the district court.
Zoeller said he is considering whether to re-try the case on other legal issues or proceed with the complaint in Epic's arbitration forum.
"While we are disappointed in the decision, and agree with Justice Ginsberg's dissent criticizing the Court's willingness to suppress workers' rights through the enforcement of unbargained-for labor contracts, and reminding us of labor law's central purpose of allowing employees to gain strength in numbers, this decision does not end this case or others like it. Where an employer fails to comply with state or federal employment laws, it cannot hide behind individual arbitration provisions to avoid liability," Zoeller said in a statement.
“The impact of this will be felt equally by everyone working in Wisconsin and everyone working in every other state,” he said. “In practice, generally these agreements are becoming more and more prevalent and we do see them more often.”