This month the Supreme Court released a significant employment law decision that may impact future arbitration agreements.

Epic Systems Corp. v Lewis

In Epic Systems Corp. v Lewis, the high court ruled in favor of the employer. The issue originated from a group of employees wishing to litigate employment disputes through collective actions in federal court. Upon employment, the employees entered into a contract providing for individualized arbitration proceedings to resolve employment disputes between the parties. The court was charged with determining whether or not individualized arbitration agreements, which prevent employees from bringing collective actions against their employer, are enforceable.

In a 5-4 vote, the conservative majority held in favor of the employer, while Justice Ginsburg led the four liberal dissenters. Justice Gorsuch wrote for the majority, beginning the opinion by stating that as a matter of policy, these issues are certainly debatable but that as a matter of law, there is only one clear conclusion.

While the Federal Arbitration Act (FAA) generally provides that arbitration agreements are to be enforced, here the employees argued that its “saving clause” removes this obligation if the agreement violates another federal law. They opined that the individualized arbitration agreements violate the National Labor Relations Act (NLRA). The court disagreed with this reasoning, holding that neither the saving clause nor the NLRA suggests individualized arbitration agreements aren’t enforceable.

Supreme Courts Opinion

The dissenting opinion argues that the court is opening the door for a return to a time of the “yellow dog” contract, where employees were not able to join unions. Additionally, Justice Ginsburg writes that preventing employees from bringing collective actions shifts too much power to employers and the secretive nature of the arbitration process may lack the necessary transparency to effectively resolve these issues.

Justice Gorsuch spent five pages responding to the dissenting opinion. He writes that the dissent “retreats to policy arguments” and emphasizes that the court is not free to substitute their preferred economic policies for those debated in Congress. Further, he explains the court’s duty is simply to interpret the law. Gorsuch responds to the dissent’s “yellow dog” claim by asserting that employees’ rights to join unions “stand every bit as strong today as they did yesterday.” Finally, Justice Gorsuch acknowledges the dissent’s claim that collective actions spread the cost of litigation but adds that they can also unfairly pressure employers to settle unmeritorious claims.

With pending cases still forthcoming relating to labor unions and “fair share” fees, employment and labor law will see several significant decisions from the Supreme Court this year.