Employees who contractually agree to resolve employment disputes in an individualized arbitration waive all rights to class actions or any other collective dispute process.
The United States Supreme Court buried any reasonable doubt that arbitration agreements in employment contracts providing for individualized arbitration preclude class actions or any other form of collective resolution process. The May 21, 2018 Epic Systems Corp. v. Lewis decision cements the rule that employees must go it alone in arbitration if the employment contract so provides. The Federal Arbitration Act “savings clause” will not defeat contractual arbitration provisions in most realistically imaginable disputes. The Epic teaching is clear: Federal courts must enforce contractual arbitration provisions as written. The exceptions are few and diminishing—perhaps limited to the rare express Congressional preclusions of arbitration.
The Epic court was divided 5-4. The dissent was vigorous, and persuasive. Yet, the rule of law is clear—no group claim resolution actions will be permitted when the contract requires one-on-one arbitration. End of story.
Beyond employment contracts, Epic heartily embraces a broad-perhaps essentially boundless-interpretation of the Federal Arbitration Acts’ requirement to arbitrate. The Epic Rule: Congress instructs federal courts to enforce arbitration agreements according to their terms, and the FAA’s “savings clause” offers little, if any, basis for defeating contractual arbitration. Federal courts may never allow “contract defenses to reshape traditional individualized arbitration” unless the contracting parties agree. According to Epic, this restrictive reading of the “savings clause” is the “essential insight” of AT&T Mobley LL v. Concepcion, 563 U.S. 333 (2011).
The Epic dissent urged that the majority forgot the labor market imbalance that gave rise to the National Labor Relations Act and ignored the destructive consequences of diminishing employees’ right to band together when confronting its employer. An argument more masterful than the dissent’s is unlikely. As the dissent’s argument was also futile, an employee who has signed an agreement providing for one-on-one arbitration should understand that his or her right to class action is waived. The employees’ recourse, if any, is to Congress rather than the Court.
The dissent urged a dramatically different position: Class action “waivers” it argued are unfair labor practices and are legally unenforceable. The dissenters challenged the existence of an agreement, noting that the arbitration provisions were emailed to employees with the requirement that the employees sign as a condition of their further employment.
The glaring contrast in the overall approach to this issue between the opinion of the Court and the dissent underscores the challenge “neutrals” so often face. Neither the Epic majority nor the dissent are appropriately described as “biased.” Yet, they certainly do not think alike. To the contrary, the chasm separating them is greater than the result reached in this case. It is fair to describe their separate writing in Epic as “advocacy.” A “neutral”—for example, an arbitrator deciding a one-on-one employee breach of a fair wage claim—may well shoulder a heavier burden than do Supreme Court Justices. A neutral—unlike a judge—should wrestle with his or her every predisposition before even agreeing to serve as an arbitrator. A true neutral should never be as outcome predictable as are many judges. Acceptable predispositions in a judge performing his or her official duties may well be a disqualifying bias in a neutral.
Jack Urquhart is an Attorney Mediator and Arbitrator. He mediates and arbitrates business, personal injury, commercial, construction, family law, divorce, child custody, elder care, and professional malpractice conflicts. He has years of focus on negotiation as an integral and essential component of dispute resolution, including cases before the court.