In a case involving Verona health software giant Epic Systems, a divided Supreme Court ruled Monday that businesses can prohibit their workers from banding together in disputes over pay and conditions in the workplace.
The decision has ramifications far beyond Epic, affecting an estimated 25 million non-unionized employees.
With the court’s five conservative members in the majority, the justices held that individual employees can be forced to use arbitration, not the courts, to air complaints about wages and overtime. Four dissenting liberal justices said the decision will hit low-wage, vulnerable workers especially hard.
While the complaints in Monday’s decision involved pay, the outcome also might extend to workplace discrimination and other disputes if employee contracts specify that they must be dealt with in one-on-one arbitration.
Workers who want to take action against sexual harassment, pay discrimination, pregnancy discrimination and racial discrimination “may now be forced behind closed doors into an individual, costly — and often secret — arbitration process,” said Fatima Goss Graves, president and CEO of the National Women’s Law Center.
Lawyers representing management said the decision protects businesses from endless, costly litigation.
The outcome does not affect people represented by labor unions, but an estimated 25 million employees work under contracts that prohibit collective action by employees who want to raise claims about some aspect of their employment.
The employees in this case involved a group of Epic Systems workers who sought to void arbitration agreements they had signed and seek redress in the courts.
The ruling reflected a years-long pattern at the Supreme Court of limiting class actions and favoring employer-favored arbitration over lawsuits in the courts, generally preferred by workers.
The Trump administration backed the businesses, reversing the position the Obama administration took in favor of employees.
Caitlin Madden, one of the lawyers representing the class of Epic technical writers in the case, said that while she and other lawyers on the case were “not necessarily surprised” by the decision, it was disappointing to see the court “siding with employers over workers.”
Madden said she is hoping that legislation that has been discussed recently will change federal law so that it would become easier for workers to opt out of arbitration agreements and make it easier to bring class actions to court.
“At this point I think that can be accomplished,” she said.
A ‘fair forum’
In the meantime, Madden said, the case will be sent back to U.S. District Judge Barbara Crabb for rulings that are consistent with the Supreme Court’s findings, but added that there are other defenses available that could be pursued. Another avenue, she said, would be to individually arbitrate each of the claims brought against Epic by affected workers.
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Madden said she did not know how many affected workers there are, as the case hadn’t progressed very far before landing in a federal appeals court. Epic had appealed a decision by Crabb not to dismiss the case over the individual arbitration requirement in workers’ contracts.
Jason Knutson, who also represented Epic workers in the case, said that Epic could simply agree to stop using arbitration agreements, as some other companies have done.
“What a statement it would be for Epic to show that it does have its employees’ interests in mind,” Knutson said.
In a statement, Epic founder and CEO Judy Faulkner praised the court’s decision.
“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,” Faulkner said. “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 high court’s task was to reconcile federal laws that seemed to point in different directions. On the one hand, New Deal labor laws explicitly give workers the right to band together. On the other, the older Federal Arbitration Act encourages the use of arbitration, instead of the courts.
Justice Neil Gorsuch, writing for the majority, said the contracts are valid under the arbitration law. “As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear,” Gorsuch wrote.
Monday’s ruling is in line with earlier decisions, he said. “In many cases over many years, this court has heard and rejected efforts to conjure conflicts between the Arbitration Act and other federal statutes. In fact, this court has rejected every such effort to date (save one temporary exception since overruled),” Gorsuch wrote.
In dissent for the court’s liberals, Justice Ruth Bader Ginsburg called the decision “egregiously wrong” and likely to lead to “huge underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.” Ginsburg said that the individual complaints can be very small in dollar terms, “scarcely of a size warranting the expense of seeking redress alone.”
Ginsburg, who read a summary of her dissent aloud to stress her disagreement, said employees do not really have a choice about whether to sign such agreements, labeling them “arm-twisted, take-it-or-leave-it contracts.”
She said “congressional action is urgently in order,” echoing her call in 2007 for Congress to address pay discrimination following a high court ruling from which she dissented.
Kristen Clarke, president of the Lawyers’ Committee for Civil Rights Under Law, said she fears the decision will have far-reaching effects. “Today’s decision will make it easier for employers to escape liability for widespread discrimination and harassment. No American should be forced to sign away their right to invoke the meaningful protections afforded by our nation’s critical civil rights laws,” Clarke said.
The National Labor Relations Board, breaking with the administration, argued that contracts requiring employees to waive their right to collective action violate the labor laws.
Business interests were united in favor of the contracts.
Gregory Jacob, a former high-ranking Labor Department official in the George W. Bush administration, said the court got it right Monday. “This decision thus will not see a huge increase in the use of such provisions, but it does protect employers’ settled expectations and avoids placing our nation’s job providers under the threat of additional burdensome litigation drain,” Jacob said.
State Journal reporter Ed Treleven and The Associated Press contributed to this report.