Was Epic Systems Really an Epic Loss for Workers?

There's no question business groups notched a victory, but does that mean workers are the losers?

|The Volokh Conspiracy |


Last week, as expected, the Supreme Court ruled in Epic Systems v. Lewis that arbitration clauses in employment clauses requiring individualized proceedings are enforceable under the Federal Arbitration Act. In a 5-4 ruling written by Justice Gorsuch, the Court concluded that neither the FAA's savings clause nor the National LAblor Relations Act (as interpreted by the National Labor Relations Board) renders such clauses unenforceable.

The outcome in this case was rather predictable because it is directly in line with a long string of Court decisions adopting a broad interpretation of the FAA and upholding arbitration clauses that, among other things, preclude class action lawsuits. There was little daylight between the claims put forward in Epic and those rejected by a 5-4 majority in prior cases such as AT&T Mobility v. Concepcion and American Express v. Italian Colors Restaurant. Whatever the merits of the Court's well-established FAA jurisprudence, Justice Ginsburg's effort to distinguish these prior cases is the least compelling part of her dissenting opinion. Concerns for stare decisis are at their zenith in statutory interpretation cases, so we should not be particularly surprised that a majority of the Court opted to stay the course.

The Epic Systems opinion unleashed an epic amount of criticism claiming that the decision was a victory for employers at the expense of workers. See, for instance, this NYT editorial and op-ed. These commentaries echo the forceful language of Justice Ginsburg's dissent,which makes explicit that she opposes the decision on both legal and policy grounds. Interestingly enough, Justice Gorsuch's opinion is expressly ambivalent on the substantive policy claim, repeatedly stressing that it is up to Congress, and not the courts, to determine whether the preclusive effect of the FAA have gone too far.

There is no question Epic Systems was a win for business groups. There's also no question that among the losers are plaintiff attorneys, as the decision will close off a range of class action lawsuits against employers. But was Epic Systems really a loss for workers?

NYU law professor Samuel Estreicher, one of the nation's foremost experts on labor and employment law, challenges the conventional liberal view of Epic. In a recent commentary for Bloomberg, Professor Estreicher suggests the opinion will actually redound to workers' benefit. He writes:

For all the alarm expressed by Ginsburg and other critics of the decision, some perspective is in order. Most employment claims are unlikely to be brought as class-action suits. In contrast to many consumer class-action claims, which deal with things like credit-card disclosures, people who get fired or denied agreed-upon wages will almost always show up in court or arbitration. Moreover, federal and state administrative agencies are not bound by private arbitration agreements; they are able to sue to vindicate "small claim" statutory rights where private claimants are not likely to come forward.

Perhaps paradoxically, workers as a class may gain from employers' having a renewed incentive to put in place fair arbitration agreements. That's because arbitration, if certain safeguards are provided, provides a cheaper, more informal mechanism for workers to assert their claims than class-action suits. Most workers don't make enough money to hire private lawyers and proceeding on one's own in court without legal representation is a fool's errand. The overwhelming majority of these "pro se" claims are thrown out well before trial; few get past the motion-papers stage.

In arbitration, most claimants are likely to get a hearing— irrespective of the strength of their claim or whether or not they have a lawyer. Getting "a day in court" — in this case, a hearing on the merits — is an extremely valuable thing, especially in cases where learning why the employer acted the way it did and being able to tell your story is likely to clear emotions and promote dispute resolution.

Arbitration has its flaws, but it often provides a lower cost, faster, and more accessible dispute resolution mechanism than litigation. Further, while class actions may be an effective way to impose pain on corporate defendants, they are not always an effective way to ensure those with legitimate claims receive actual compensation. Archis Parasharami and Dan Jones make a similar point here.

There is a reflexive tendency in some corners to assume that a win for business must be a loss for workers or consumers. Sometimes this is true, but not always. In some cases, reducing costs and increasing efficiencies produce welfare gains for workers and consumers, and in some cases, when business wins, it only means that plaintiff's lawyers are the losers. If Estreicher is correct, Epic Systems may be one of those cases.