February 28, 2019

“[Epic] changes the dynamics in a profound way,” said Gerald Maatman, a partner at Seyfarth Shaw in Chicago. “It’s one of the most important decisions from the Supreme Court that impacts workplace issues.”

The case before U.S. District Judge Gerald McHugh Jr. was not unlike others he’d seen before. A woman alleged sexual harassment in the workplace so severe she had been forced to quit her job. Her former employer, a global talent agency called MarketSource, was arguing that the whole dispute ought to be in front of an arbitrator—not in a public courtroom.

McHugh, sitting in the Eastern District of Pennsylvania, left no doubt about his misgivings, writing “there is legitimate cause for concern when a parallel system of dispute resolution supplants the courts.” But in the face of a growing constellation of U.S. Supreme Court decisions favoring arbitration contracts, the judge concluded in a decision last November that he had little choice but to side with the company.

In the wake of the U.S. Supreme Court’s split decision in Epic Systems Corp. v. Lewis, which further bolstered the Federal Arbitration Act, that outcome has been increasingly common for workers who try to take their employers to court. Claims of persistent sexual harassment and discrimination in the workplace, fast-food workers shorted on pay and gig economy contractors fighting for employee status have all been routed to arbitration in decisions citing Epic. In less than a year, the ruling has proven to be a strong weapon for the pro-arbitration defense bar.

In collaboration with San Francisco-based legal research company Casetext, The National Law Journal analyzed 92 decisions from U.S. courts of appeal and federal district courts that cited Epic in the seven months between when it was handed down last May and the end of 2018. Among those cases, 10 circuit court and 49 district court decisions centered on arbitration and dealt with workplace claims—and the majority either compelled arbitration or revived it as a live issue.

“[Epic] changes the dynamics in a profound way,” said Gerald Maatman, a partner at Seyfarth Shaw in Chicago. “It’s one of the most important decisions from the Supreme Court that impacts workplace issues.”

Scale of the Impact

In Epic, which reviewed a trilogy of labor cases from the Fifth, Seventh and Ninth circuits, the Supreme Court majority concluded that, in the eyes of Congress, “arbitration had more to offer than courts recognized—not least the promise of quicker, more informal and often cheaper resolutions for everyone involved.”

The high court found the arbitration contracts at issue—which required employees to arbitrate individually rather than collectively—were to be enforced as written. Critically, the majority concluded that arbitration contracts that waive an employee’s right to bring class or collective claims do not violate the National Labor Relations Act (NLRA).

That finding has rippled through dozens of worker lawsuits, many of which had used the NLRA argument to attempt to nullify agreements to arbitrate disputes. It has impacted headline-grabbing cases, such as a pair of now-unraveled class actions against ride-hail giant Uber, as well as many other suits that would be unlikely to garner much public attention.

. . .

The pro-arbitration defense bar arguably already had the upper hand in the wake of earlier Supreme Court decisions in American Express v. Italian Colors Restaurant and AT&T Mobility LLC v. Concepcion.

Kalpana Kotagal, a partner at Cohen Milstein Sellers & Toll, said Epic raised concerns because it eliminated the open angles that could provide a clear channel for collective legal action. She said the new process will create inefficiency for both sides.

“At some point, defendants will tire of contending with many findings alleging the same things,” Kotagal said. “In the meantime, the folks representing employees will not go away. These issues are important. The claims are still there. Employees need to vindicate their rights. Creative lawyers will pursue create strategies. Will Epic make that harder? There’s no question about that.”

The complete article can be accessed here.