How The Supreme Court's Arbitration Decision Will Affect You

Yesterday, the Supreme Court ruled that workers can't band together to challenge companies over pay or work conditions if they have signed an arbitration agreement. It's a massive blow to as many as 25 million American workers who aren't protected by unions.

The outcome means that workers for private companies can no longer bring class action lawsuits against employers if they agreed to mandatory arbitration, a condition of employment at many companies. This is a devastating decision that some say sets labor laws and worker's rights in the U.S. back by 80 years.

Here's what the decision means for you.

The case is Epic Systems Corp. V. Lewis is a class action lawsuit originating in Wisconsin. The case involves Epic Systems, a company that makes healthcare software, and one of its employees, Jacob Lewis. In 2016, Lewis sued the company for purposely misclassifying him and other technical writers in order to deny them overtime pay. But Lewis had signed an arbitration agreement the company required of its employees in 2014, so Epic argued that Lewis could not bring a class action suit against them.

The case was closely watched by labor groups is because the central question involved class action waivers in employment agreements and whether companies can force employees to agree to individual arbitration as a condition of employment. It pitted two federal statues against each other: the Federal Arbitration Act and the National Labor Relations Act (NLRB), which says that collective action by employees shouldn't be restricted.

Lewis' case was combined with two cases which were all decided by yesterday's SCOTUS decision: One in which the NLRB sued an Alabama gas station for not letting its workers come together to fight underpayment, and another where Ernst & Young was also accused of misclassifying workers in order to deny them overtime pay.

Yesterday's decision is almost certainly bad news for anyone who works for a private company.

A 2018 study by the Economic Policy Institute found that more than half of private, non-union employees — some 60 million workers — are subject to mandatory employment arbitration procedures. That means if you signed something that says you agree to mandatory arbitration if you have an issue with your company, you cannot bring a class action lawsuit against your company with your colleagues.

The only silver lining is that the decision is likely to add fuel to the movement to rid companies or forced arbitration agreements in general. In recent months, white collar tech workers have seen some progress as Microsoft and Uber have ended forced arbitration for sexual harassment claims. That's something, but it won't help when workers need to come together to fight pay practices.

This case was particularly relevant in the time where a national conversation is happening around the practice of forced arbitration and the #MeToo movement: Employees who want to challenge their companies on workplace conditions — such as sexual harassment, or any kind of discrimination from gender, pay, pregnancy, to race — in court, may not do so together anymore if they have signed a forced arbitration agreement as a condition of joining a company. (Broadsheet dubbed this decision Supreme Court v. #MeToo.)

Part of the problem around sexual harassment reporting is that women who band together against a serial predator (such as Roger Ailes or Matt Lauer) or a toxic workplace culture that condones such behavior may not be able to do so. They will be forced into individual arbitration if they've signed the initial agreement. Many rightfully worry this will greatly reduce the number of women who will have to come forward alone. Additionally, this decision will likely affect the way state laws apply to companies.

“There has been a great push in various states around the country to prohibit mandatory arbitration clauses for claims of workplace sexual harassment," says Deena R. Merlen, a partner who practices in New York and Connecticut with the law firm Reavis Page Jump LLP of the SCOTUS decision.

While New York state has passed a law prohibiting companies from instituting mandatory arbitration agreements for claims of workplace sexual harassment, Merlen says that the law, set to go into effect in July of this year, might not apply if it is deemed to be inconsistent with federal law. "We have been eagerly awaiting this Supreme Court decision to glean if New York’s prohibition will be chipped away or preempted by the Federal Arbitration Act. This Supreme Court decision does not bode well for those in New York (and elsewhere) who believe that such mandatory arbitration clauses should be prohibited as part of a larger strategy to reduce sexual harassment in the workplace."

The vote was five to four for yesterday's decision, with conservative justices voting for the motion. Justice Ruth Bader Ginsburg wrote the dissent, calling the decision "egregiously wrong" and stating that the decision will "permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations." She is joined in her position by Justices Breyer, Sotomayor, and Kagan.

Justice Ginsburg wore her dissent collar and read her dissent from the bench. For those who follow SCOTUS decisions, this is a sign that Ginsburg passionately disagrees and is protesting the decision. (Insiders noted that there were no "Gins-burns" — zingers Ginsburg is famous for — in the dissent yesterday.)

It's important to note that while yesterday's decision has been discussed in the context of #MeToo and discrimination, Ginsburg's dissent focused largely on issues around pay. The words woman, women, and harassment do not make an appearance in her dissent.

"I do not read the Court’s opinion to place in jeopardy discrimination complaints asserting disparate-impact and pattern-or-practice claims that call for proof on a group wide basis," wrote Ginsburg. Speaking to the enforcement of state statues though, Ginsburg wrote that it will lead to the "under enforcement of federal and state statutes designed to advance the well-being of vulnerable workers."