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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?

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.

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  • bernard11||

    This is stretch.

    How likely is an individual employee to even go to arbitration without some help?

    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.

    Well, thieves deserve some punishment, don't you think? Besides the very fact that some - probably many - employees won't file arbitration claims makes it safer for the employer to engage in shady practice. Does arbitration even allow for anything resembling punitive damages, or is it heads I win tails we tie to the employer?

  • BillyG||

    You're missing the point entirely. At least when theives are punished, those stollen from are made whole in some way. Now imagine if recovered property were instead taken by the prosecutor instead of being returned to those whom it was stolen from. That's what most Class Action lawsuits are today. The class action lawyers get millions and the rest get enough to maybe buy a cup of coffee.

  • bernard11||

    You are thinking of securities class actions, I believe. I'm not a fan of those for lots of reasons, including the one you identify.

    Oh, and in ordinary theft cases those stolen from are often not made whole. Even if there is a restitution requirement, how is the thief going to pay?

  • BillyG||

    You are thinking of securities class actions, I believe. I'm not a fan of those for lots of reasons, including the one you identify.

    That's one example, but not the only. Think deffective product lawsuits for example. See here for a number of examples. I encourage you to read the whole thing and not just the first few paragraphs covering failed lawsuits. Payouts for some successful ones are listed further down.

    Securities Lawsuits, if I understand what you mean to be one against a publicly held company, I consider a straight up con job. The owners of the company (the shareholders) receive a payout from the company they own and the 3rd party lawyer walks away with money too which belonged to the shareholders. There's no actual gain to the shareholders, only a loss. The only ones who come out ahead are the lawyers. The company loses money and hence the owners/shareholders do as well.

    Even if there is a restitution requirement, how is the thief going to pay?

    If the property is recovered, that goes back to the original owner. Beyond that, once the theif is out of jail, then garnish the theifs wages.

  • bernard11||

    I read it. Yeah. There are some silly lawsuits filed. Lots of them seem to be dismissed pretty quickly, but regardless, cherry-picking examples of stupid ones doesn't mean they are all awful. Maybe we could improve the system by giving lawyers some disincentive to discourage their filing.

    I share your sentiments about securities class actions. They are ridiculous. Even if the harm is there, which it often isn't, the suits do nothing to redress it.

    If the property is recovered, that goes back to the original owner. Beyond that, once the theif is out of jail, then garnish the theifs wages.

    If it's recovered, undamaged, you might get it back after a while. As for garnishing the thief's pay, that's not going to get you much. If you own a business and an employee embezzles $25,000, say, good luck with the garnishment.

  • loki13||

    "I share your sentiments about securities class actions. They are ridiculous. Even if the harm is there, which it often isn't, the suits do nothing to redress it."

    Strike suits in securities law is perhaps the go-to example of how bad the law (and the lawyers) in America can be.

    That said, derivative suits can be a necessary evil, especially where you have small, closely-held corporations.

  • bernard11||

    IIUC, a derivative suit targets individuals, not the corporation. I agree that they are often justified. They do, after all, go after defendants who may really have done something wrong, rather than innocent bystanders, including some who may have actually been harmed by the relevant behavior.

  • loki13||

    "IIUC, a derivative suit targets individuals, not the corporation."

    Most of these "strike suits" are derivative suits brought in bad faith against a large, publicly traded company (for the stock price going down, etc.) that the plaintiff knows, or should know, have no real basis in the law but are more easily settled than litigated.

    They aren't as prevalent and as bad as they used to be, but when I think of the worst of thw worst, I don't think of ambulance chasers- this is what I think about.

  • phoqueue||

    At least when theives are punished, those stollen from are made whole in some way.

    That is wrong. It is extremely common for theft prosecutions to result in no actual restitution to the victim.

  • JesseAz||

    Your arguments get sillier and sillier by the day. Going through arbitration is far simpler than going through a civil court system, and costs nothing up front. Finding a pattern of abuse, finding more workers to sign on, etc are all far more complicated.

    And you still seem ignorant to the fact that the average payout per employee is higher in arbitration than it is in class action law suits, and it's not close. Maybe some education on topics next time Bernard.

  • NToJ||

    "Going through arbitration is far simpler than going through a civil court system, and costs nothing up front."

    I don't know how the arbitration agreements at issue are structured, but 100% of the arbitration demands that I have filed, require my client to pay a fee that is usually over 10 times greater than the filing fee in court. In my experience arbitration is much more expensive up front, but often-times cheaper overall.

  • phoqueue||

    Going through arbitration is far simpler than going through a civil court system, and costs nothing up front.

    No, it is typically the case that the claimant in arbitration must pay a filing fee.

  • nonzenze||

    I think the very idea of using the civil court system primarily to punish wrongdoers indicates a breakdown in the actual legislative/executive function of enforcing the law.

    Punitive damages are the exception, not the rule -- which is to make whole those that are injured.

    or is it heads I win tails we tie to the employer? First, how is this different from most cases? If I cause a traffic accident and then contest fault in court, it's head I win, tails I tie and have to pay the damage from the accident that I caused.

  • bernard11||

    I think the very idea of using the civil court system primarily to punish wrongdoers indicates a breakdown in the actual legislative/executive function of enforcing the law.

    Well, it's not primarily, but I take your point. The trouble is that there don't seem to be other ways to punish this wrongdoing. So what do you suggest?

    how is this different from most cases? If I cause a traffic accident and then contest fault in court, it's head I win, tails I tie and have to pay the damage from the accident that I caused.If I cause a traffic accident and then contest fault in court, it's head I win, tails I tie and have to pay the damage from the accident that I caused.

    You have no incentive to cause a traffic accident. Employers have plenty of incentive to cheat on wages. If the only potential cost is having to pay what they should have to begin with that encourages bad behavior.

  • Joe_dallas||

    Bernard11 - Employers have plenty of incentive to cheat on wages. If the only potential cost is having to pay what they should have to begin with that encourages bad behavior.

    Incentives such as
    1) lower worker productivity
    2) higher employee turnover
    3) higher employee replacement costs
    4) lower employee morale
    5) missed deadlines because workers wont care

    sorry original post in wrong spot

  • nonzenze||

    Well, it's not primarily, but I take your point. The trouble is that there don't seem to be other ways to punish this wrongdoing. So what do you suggest?

    A legislative solution where an executive branch agency is empowered to make wage compliance easily verifiable. One that could investigate claims of wage theft and take criminal/civil enforcement action against violators.

    This is a low bar though, literally any solution other than class-action suit would be better.

    You have no incentive to cause a traffic accident. Employers have plenty of incentive to cheat on wages. If the only potential cost is having to pay what they should have to begin with that encourages bad behavior.


    And yet there are civil/criminal penalties for causing traffic accidents beyond simply making whole the victims!

    I mean, I'm on your side -- I would like to have systematic improvement and strong deterrence against violators. My point is that the tort system is poor fit for those goals.

  • loki13||

    "A legislative solution where an executive branch agency is empowered to make wage compliance easily verifiable. One that could investigate claims of wage theft and take criminal/civil enforcement action against violators."

    They have this. It's called the Department of Labor. When they act, they do a good job. They are not sufficiently funded or staffed for the volume of complaints.

    "This is a low bar though, literally any solution other than class-action suit would be better."

    Technically, almost all wage complaints are collective action. Class actions are rare, but becoming more common due to hybrid claims (state/federal).

  • nonzenze||

    Right, so you asked "what do you suggest" and I said stronger legislative/executive action. For instance, staffing the Dept of Labor and giving them some more tools to act.

    That is, indeed, what I suggest. Working through the political process to achieve regulatory aims.

  • loki13||

    1. Please understand how comment threading works. I did not ask "what do you suggest." That was Bernard. I am more than aware of the benefits and the drawbacks of the DOL. And while the DOL is relatively great good at systemic issues (although I don't think you fully understand the cost/benefit of what you are requesting), they still aren't good at the individual issues.

    In addition, I am not sure you are fully cognizant of the framework of the law; are you suggesting removing all private rights of actions at both state and federal level and replacing it solely in the purview of a federal agency?

  • nonzenze||

    Well, for one the commenting system here sucks. We should just create a subreddit and comment there.

    Second, I was asked "what do you suggest", and I suggested solving policy problems through the political system.

    Finally, I'm not suggesting removing private rights of action. Nor am I suggest that the States should not play a large part in regulating here. I am only suggesting that furthering the goal of wage issues in a systemic, scalable and sustainable way through a system of individual or class action civil trials seems least likely to succeed.

  • loki13||

    "Well, for one the commenting system here sucks. We should just create a subreddit and comment there."

    Fair enough.

    "Second, I was asked "what do you suggest", and I suggested solving policy problems through the political system."

    I'm pointing out that it has been. To the extent that state laws are adopted, and they have been, they tend to mirror the successful provisions of the FLSA.

    "Finally, I'm not suggesting removing private rights of action. Nor am I suggest that the States should not play a large part in regulating here. I am only suggesting that furthering the goal of wage issues in a systemic, scalable and sustainable way through a system of individual or class action civil trials seems least likely to succeed."

    I suggest doing more research and having a better understanding of the issue prior to making bold pronouncements. There are issues with wage theft, and serious ones at that. For the most part, the allowance for a private right of action have been a good thing. That said, I would also point out that it has been the subject of abuse; whether that requires an adjustment in the law, or not, it another question.

    Further, collective and/or class actions are actually unusually well suited for wage issues, as actual wage issues tend to be the result of a common policy or procedure that results in the problem.

  • Rossami||

    re: "How likely is an individual employee to even go to arbitration without some help?"

    Given the number that already do go to arbitration, very likely. And even the ones that need some help to get to arbitration will need FAR less expensive help.

    re: "thieves deserve some punishment"

    You assume without evidence that the employer is automatically in the wrong and deserving of the punishment. You ignore the many lawsuits that are filed because the employee is in pain and lashing out regardless of actual fault. You also ignore the far larger number that are filed because some shady lawyer sees a large class-action payout that will at best return a few coupons to the "injured" plaintiffs.

    The article is dead-on that this is a loss for plaintiffs' lawyers - and I'm having a really hard time seeing that as a bad thing.

  • loki13||

    " that will at best return a few coupons to the "injured" plaintiffs."

    Again, this is about EMPLOYMENT.

    Which means we are discussing collective actions (FLSA) and class actions (state wage claims/hybrid claims, and other employment claims).

    It is certainly not my experience that class or collective action claims in this context return a few coupons.

  • bernard11||

    You assume without evidence that the employer is automatically in the wrong and deserving of the punishment.

    No. I am happy to go with the verdict.

  • NToJ||

    "Does arbitration even allow for anything resembling punitive damages..."

    Sure, if the arbitration agreement allows it, and the claims asserted entitle the party to recover punitive damages. I've seen arbitrators award punitives.

  • BillyG||

    I think Class Action cases in general are a loss. Out of all the the class action cases I've seen and been a "party" to, the only one which provided any meaningful benefit for the the class of people was one where the lawyer was a the state attorney general brought on behalf of one of that state's universities. Every other time, class action lawsuits just turned into a way to enrich the suing lawyers.

  • Sarcastr0||

    Class actions are not meant to be restitution; they are corrective.
    It's paying the lawyer to punish corporate wrongdoing that would otherwise fly under the radar.

  • bernard11||

    The trouble is the wrong people are punished.

  • Sarcastr0||

    Sometimes, sure. I'm not sure that means you should have BillyG's general hostility to the concept though.

  • bernard11||

    I have that attitude towards the big securities class actions where the lawyers get a lot of money from the corporation and the "victims" get a pittance.

    Remember, the money the corporation pays out comes out of the shareholders' pockets and yet most of them had little or nothing to do with the matter. The problems are the way the actual malefactors are shielded as individuals, and the fact that the allegations of wrongdoing often seem very weak. "I bought the stock because you were so cheerful at the annual meeting, and it went down."

    OK. That's an exaggeration, but the causal links between whatever the conduct was and the damage incurred often seem weak to me.

  • Sarcastr0||

    This is already out of my depth.

    If it doesn't hurt the company the incentive isn't working as expected. But companies are strongly incentivized to keep their shareholders happy, no?

  • bernard11||

    If it doesn't hurt the company the incentive isn't working as expected. But companies are strongly incentivized to keep their shareholders happy, no?

    I'd say if it doesn't hurt the actual wrongdoers - assuming there really was wrongdoing, which there often was not - the incentive isn't working as expected. Remember that the executives responsible may already be gone from the company, or may have racked up so much by inflating share values that keeping the shareholders happy - not real high on the list to begin with - becomes even less important.

  • Bored Lawyer||

    Really? That is not what Rule 23 seems to say. I thought the point was to pool many small claims to make it worthwhile for an attorney to take on a case and get compensation for his clients.

    If class actions do nothing for the class, then they should be abolished.

  • Sarcastr0||

    Why should the be abolished? Think of the alternatives in cases where the payout is marginal to each class member:

    1) corporations get away with all sorts of injustice so long as they keep the amounts below where victims would be willing to go through the nuisance of a lawsuit. Over lots of people, that adds up.
    2) a much larger regulatory state to policy corporations to prevent corporations from taking advantage of that loophole.

    Beyond that I learned this in law school as baseline legal policy, this is not some radical idea - is not one of the purposes of torts not just making whole but also deterrence of fault?

  • loki13||

    " is not one of the purposes of torts not just making whole but also deterrence of fault?"

    Strangely, this is a modern, conservative, proto-L&E take on torts.

    One that is correct, and IMO indisputable, but it is weird how something that is conservative and now internalized by many is so easily dismissed when it is convenient to to so.

  • Bored Lawyer||

    Tort recoveries may act as a deterrent to wrongful behavior, and that can be a good thing. But that is not their primary purpose -- their purpose is to compensate the victim(s). And that is certainly the case in class actions -- the whole point of a class action is that the class is seeking recovery. That is how Rule 23 is structured, and the interests of the class need to be represented that way.

    If one concludes that class actions provide little compensation to the victims, then something is seriously wrong with them and they are in need of major overhaul.

  • loki13||

    Your response, quite literally, makes little-to-no sense. Let me illustrate why-

    " the whole point of a class action is that the class is seeking recovery."

    Okay.

    "If one concludes that class actions provide little compensation to the victims, then something is seriously wrong with them and they are in need of major overhaul."

    No.

    Because, again, the canonical example of the efficient class action is where a company, say, is defrauding its customers by a few pennies a month. No customer (except the crazy ones) would litigate against that sort of wrongdoing. In fact, for any given individual a court could well rule that the de minimis recovery isn't even cognizable. But in the aggregate, we could be talking about millions, or billions.

    Now, this isn't true about all class actions. And IMO there are a lot of plaintiffs' attorneys that abuse the process and settle claims that are worth a lot more for their own benefit and to the detriment of the class. But the issues of, um, collusion in settlement is different.

    (And as an academic issue the sea-change in some conservatives, and their view of torts vis-a-vis deterrence and compensation, has been astounding to me. FWIW, tort law has historically been all about compensation, and I'll stand by what I wrote wrt. deterrence.)

  • Bored Lawyer||

    How does you example refute what I said?

    If someone cheats me out of $25, it is not worth it for me to do anything about it, except maybe complain. But if there are another 1,000,000 people like me, that is $25 Million worth of cheating going on. A good class action lawyer ought to be willing to take on the case for $5 Million (even if there is a million in expenses). If I get $25 back, and the judge carves out $5 for my part of the lawyer's compensation, then yes, it is worth it to me to give up a part of what I am due.

    In my example, the class got $20 Million, $20 for each class member. That is compensation. Perhaps small for any one class member, but it is still compensation.

    If, on the other hand, the class members each get a $10 coupon on their next purchase of a widget from the same company that cheated them in the first place, and the lawyer walks away with $5 million, then there is something wrong with how that case was handled.

  • loki13||

    "How does you example refute what I said?"

    And how does your example refute what I said? Here, I'll say it again to save you a lot of typing!

    "And IMO there are a lot of plaintiffs' attorneys that abuse the process and settle claims that are worth a lot more for their own benefit and to the detriment of the class. But the issues of, um, collusion in settlement is different."

    Since you get so Bored when you are lawyering, why not excite yourself by imagining that lawyers are adverse parties. Now, imagine that the defense counsel and the plaintiffs' counsel have done a cost analysis of this case. At various procedural points (MtD, SJ, pre-trial, pre-verdict) those numbers might change. The Defense counsel will want to pay the absolute minimum it can get away with, usually by some combination of ineffective notice provisions and some mechanism that ensures that it will be inconvenient for Plaintiffs to fully realize their money - like an NFL contract, you hope to structure it so that the announced amount > the payout.

    To the extent that Plaintiffs' counsel play along with this to maximize their own earning, as opposed to the benefit for the class, there is an issue- but that has nothing to do with class action, so much as unscrupulous attorneys. Which is always an issue.

  • Bored Lawyer||

    Maybe you missed it, but this discussion started with the following assertion:

    Class actions are not meant to be restitution; they are corrective. It's paying the lawyer to punish corporate wrongdoing that would otherwise fly under the radar.

    That is simply wrong, and if it is true in practice, there is something fundamentally wrong with class actions.

    That has nothing to do with the negotiation between plaintiff's side and the defendant's side, whether a class action or a regular civil action. Nor does it have to do with whether or not there is abuse or collusion.

    The question is, what do class actions (or a sub-genre of them -- in this post, employee class actions) do for the class members. If the answer is. not much, then they are in need of serious overhaul.

  • loki13||

    ""Class actions are not meant to be restitution; they are corrective. It's paying the lawyer to punish corporate wrongdoing that would otherwise fly under the radar.

    That is simply wrong, and if it is true in practice, there is something fundamentally wrong with class actions."

    To the extent that you are replying only to that quote, then we don't disagree.

    " If the answer is. not much, then they are in need of serious overhaul."

    That's more complicated, as I was alluding to. It would require greater judicial scrutiny of class action settlements, and/or more time given to objectors. But that's not a problem with the class action nature; it's more of a general problem.

  • Sarcastr0||

    You seem to be anthroporphizing class. Under your rubric, who cares if the 'class' gets $25M if each individual gets maybe $25, after they jump through all the hoops?

    If each individual in the class isn't getting a functional benefit, what value is served?

  • Bored Lawyer||

    Except the class members (other than those who are the representatives) generally do not have to do much, if anything. So there is very little, if any, jumping through the hoops.

    And who says that $25 is insignificant. I don't like losing $25, especially to a ripoff. Generally, that is too small to bring a suit, but if a lawyer is willing to take it for $5 -- which is a contingency yet -- why not? A class action is a way for me to get a lawyer for $5, by pooling my $5 with all those in the class.

  • phoqueue||

    I don't know what "primary purpose" really means or where you're getting that idea. But tort law has long recognized concepts like the internalization of costs. Carroll Towing, for instance, is more than 70 years old.

  • NToJ||

    Are employment claims always tort claims?

  • loki13||

    They are (ALMOST) always statutory claims.

    For example-

    FLSA (and state-law equivalents).
    Title VII (and state-law equivalents).
    ADA (and state-law equivalents).

    There are very few, if any, contract claims because most Americans do not have employment contracts. You will see, however, breach of confidentiality and/or non-competition.

  • NToJ||

    That all makes sense. My impression is that there has to be some "contract" (even if not a contract claim) because otherwise why are we talking about arbitration in the first place? Consent not coercion, etc.

  • loki13||

    Normally, the arbitration clause is either in your employment handbook (bad idea) or it is one of those papers that you sign your first day of work.

    And it will govern all those statutory claims.

  • NToJ||

    I remember a Title VII (sexual harassment?) case where an employee was sent to arbitration (by SCOTUS I think) because the handbook included statutory claims in its scope. I'm sure it was a normal, broad FAA case. As a law student I had a very difficult time understanding how that could be the law. As an employer I feel differently.

    I mention it only because employees do not have to accept arbitration as a remedy for sexual harassment from their employers.

  • loki13||

    "I mention it only because employees do not have to accept arbitration as a remedy for sexual harassment from their employers."

    I'm not fully sure I understand this. Do you mean that they can seek other employment? Or are you referring to something else?

  • NToJ||

    That's all I meant (that they can seek other employment).

  • Tatil Sever||

    Chopping off certain body parts as punitive compensation? :-)

  • phoqueue||

    Failure to pay wages according to the agreement is a standard contract claim that may or may not constitute a separate statutory violation.

  • phoqueue||

    Every other time, class action lawsuits just turned into a way to enrich the suing lawyers.

    Class actions scare the hell out of potential defendants, thereby exerting a measure of deterrence that the government will never exert. So, no, they aren't just a way to enrich lawyers. They're also a way to deter bad actors.

  • Thrax2||

    workers as a class may gain from employers' having a renewed incentive to put in place fair arbitration agreements

    They have that incentive? News to me. I'd say the opposite is true: with courts closed off as a means of litigating employer conduct that affects a lot of workers, the employers have an incentive to make arbitration even more tilted in their favor.

    The linked article also ignores an important reason why class actions are necessary: to address conduct that harms many people, but to a limited extent--so that it doesn't make sense to hire a lawyer and sue/pursue arbitration. "MegaCorp has decided to deduct $10 from every employee's paycheck this month, because we can. Here's what you do to pursue arbitration." Class actions are a disincentive to that kind of conduct, and the disincentive is now gone.

  • JesseAz||

    "an incentive to make arbitration even more tilted in their favor."

    Can you prove this is even happening? Seems arbitration works out for most employers that go through it.

    Your follow up argument is just as silly. Employees talk. If many actually go to file grievances, arbitration can still happen at a wide pace, see: link

    And you, like most of the ignorant leftists on here, seem to ignore the fact that the average arbitration agreement pays out more than the average class action lawsuit. Many studies have shown this. You have been sold a bill of lies from trial lawyers who are huge lobbyists to Democrats.

  • Thrax2||

    the average arbitration agreement pays out more than the average class action lawsuit

    Pretty sure you mean arbitration award. Very possibly, because class actions are designed to address small harms suffered by a lot of people, as I said above, and that's how they're used. Arbitrations are supposed to address individuals' unique harms, which, when they result in an award, tend to be larger.

    Seems arbitration works out for most employers that go through it.

    Oh, it does! For employees, not so much, particularly when the employer gets to choose who the arbitrators are.

  • loki13||

    So I was looking over Prof. Estreicher's impressive CV and trying to understand the disconnect. And then I understood it- he has a lot of experience with labor law (unions). So, a bit of background.

    If you are a union, you often like having arbitration clauses in your CBA. Why? Because unions are repeat players. A union usually has the internal know-how to file and prosecute simple arbitrations, and can bring in their attorneys for the bigger ones. It allows the unions to litigate issues at a low cost. Moreover, most unions share lists of arbitrators, and know which ones are decent (there is often a provision for picking arbitrators as well). So - it's a big win for unions!

    But ... individuals are not unions. Most workers aren't going to file their own arbitration. Most aren't going to know which arbitrators are good and bad. They are going to need attorneys. And attorneys LIKE TO GET PAID. It's well known that arbitration pays out less, on average, than court. And plaintiffs' attorneys hate arbitration.

    This is even moreso when you have class action issues.

    Look, it comes down to revealed preferences. What defense attorney worth his salt doesn't recommend having an arbitration provision with a class-action waiver for employment matters? Show me. Show me that defense attorney.

  • loki13||

    This is not a reflexive tendency; this is the truth. (FWIW, I think good arguments can be made that certain employment laws need to be reformed, and that lowering costs to businesses is a good thing, but to argue that this isn't a huge win to business, a big blow to plaintiffs' attorneys, and a concomitant loss for worker's abilities to enforce their rights is ludicrous.)

  • JesseAz||

    So you were looking over someone's resume... to attack their argument... by creating an ad hominem attack. Never change in your ignorance loki.

  • loki13||

    Jesse- never stop trying to opine on a topic you know nothing about.

    This isn't an ad hominem (not that you understand that, as opposed to cycling through "strawman DERP ad hominem!" when the world confuses you), it's an attempt to understand why a law professor with an understanding of this field of law would get the PRACTICE so wrong.

    And my supposition is because of his experience with LABOR (as opposed to EMPLOYMENT) law. Which I explained. Now, if you had any experience with these issues, as opposed to just staying at a Holiday Inn Express and making stuff like you always do, it would be pretty obvious what I was talking about.

    But please, clown yourself some more and show your ignorance of the topic.

  • loki13||

    I'll help Jesse by giving him the stuff he can start googling so he can keep trying to appear smart (and failing miserably).

    Start by understanding, for example, the difference between a collective and class action. Then find out what area of law that matters in.

    Perhaps you can then branch out to see what the state of the law is/was regarding hybrid suits, and why that would matter in different jurisdictions.

    Then why don't you bedazzle us with you knowledge of best practices for counseling employers, based on your experience as a practicing attorney.

    C'mon, Jesse, show us your stuff! YOU CAN GOOGLE IT!

  • nonzenze||

    It's well known that arbitration pays out less, on average, than court.

    Which is, of course, false. The average plaintiff sees a smaller award from a class action than from arbitration.

    Now, maybe the company pays out more in court, but that's because courts are expensive claims-resolution systems. For a plaintiff who sees $100, the fact that the company paid the class attorneys millions somehow is less than fulfilling.

  • loki13||

    1/
    Your reading comprehension isn't usually this bad, so I will give you my (VERY LIMITED) benefit of the doubt.

    Let's try again. Here is my quote-

    "It's well known that arbitration pays out less, on average, than court."

    Here is what you said.

    "The average plaintiff sees a smaller award from a class action than from arbitration."

    So you can't switch the topic and then say I was wrong. FWIW, it is also true that class action arbitration awards are less than class action court awards, but the sample sizes and reports of class action arbitration awards (self-reported) are so low that I would take that with a pound of salt.

  • loki13||

    2/

    Moving on, you are attempting to conflate CLASS ACTION awards, where you often have awards for a large class, many of who were unaware of the suit until notice, or a lawsuit that involves nominal sums spread over a large number of people, with INDIVIDUAL AWARDS in arbitration. Can't do that.

    As you are most likely aware, the INDIVIDUAL AWARDS in arbitration are much less than the INDIVIDUAL AWARDS from court- both in terms of awards from "jackpot juries" and in terms of settlements. This is even moreso when it comes employment issues.

    So, after correcting your error, I would go back to my original point; repeat players love arbitration. It is great for, inter alia, unions. It is great for employers. It is also great for keeping down the cost of litigation.

    (And your example, by the way, doesn't make sense. Employee class actions are not the same as, for example, "cents on your phone bill" class actions.)

  • nonzenze||

    Fair enough on the empirical point of not having sufficient sample size, but that falls on both sides of the claim then.

    My point was that the correct metric is, for similar claims, the sum awarded to each plaintiff.

  • bernard11||

    The average plaintiff sees a smaller award from a class action than from arbitration.

    So what? That's comparing apples and oranges. See Thrax2's comment above:

    class actions are designed to address small harms suffered by a lot of people, as I said above, and that's how they're used. Arbitrations are supposed to address individuals' unique harms, which, when they result in an award, tend to be larger.

  • nonzenze||

    Conceded that we'd need a better comparison.

    That said, I will re-iterate my point that for like cases the appropriate metric is the amount of money awarded, per plaintiff.

  • loki13||

    "That said, I will re-iterate my point that for like cases the appropriate metric is the amount of money awarded, per plaintiff."

    And if you use the appropriate metric, the court system (and juries) pay a lot better.

    But to the extent you don't want to believe this, just use revealed preferences. EMPLOYERS USE ARBITRATION CLAUSES. The do it for many reasons- confidentiality. Because they can make the rules whatever they want (within reason). Lowers their own costs (less pressure to pay nuisance suits). Less discovery (which, again, less costs). Less pressure to settle because less costs and lower expected payout. No chance to appeal (finality, less costly). And because arbitrators award less, and with less variance, than taking the case all the way.

    But, sure, maybe they do it because arbitrators award more?

  • nonzenze||

    It's easily mathematically possible that both arbitrators award more and arbitration costs less in total.

    The lowered process costs in terms of time, discovery and attorneys alone might be worth it, even if the awards and distribution of awards didn't change or were less favorable.

    The lesser variance in awards alone might be worth it, even if the mean award didn't change or was less favorable.

    The lack of bad publicity alone might be worth it, even if the distribution of awards didn't change or became less favorable.

  • loki13||

    Anything is possible; that doesn't make it true.

    Given that I am intimately familiar with this from a professional perspective, and given that I try to stay up on the literature and studies in order to make sure that I continue to make the right call, I fail to see how your hypotheticals are illuminating instead of obfuscating.

    To the extent that this is unclear- the day that I think I can find a more cost-effective way of getting rid of worker's claims than arbitration is that day I will recommend it. Understand?

  • phoqueue||

    I don't see why deterrence (which isn't directly reflected in net awards to plaintiffs) is an inappropriate metric.

  • nonzenze||

    Because it doesn't do jack for the plaintiffs -- the folks on whose behalf you pretend to be advocating!

  • MonitorsMost||

    Class-based discrimination claims are ususally bunk like Dukes v Walmart, the scenarios where discrimination against an entire class with common proof just don't exist anymore, if they ever did.

    Wage claims on the other hand....

  • Sarcastr0||

    The question is whether 'usually bunk' is enough to close the courtroom door.

  • David Cary Hart||

    With the caveat that I am a retired CEO, much depends upon the amount involved.

    For example, let's say that a worker feels he was cheated out of $7,500. The amount is insufficient to attract an attorney on a contingency fee basis. Representation on an hourly fee basis may very well be more than the amount involved.

    Even though the scales are tilted towards the employer (who selects the arbitrator) the employee has a fighting chance.

    As an aside, one of the mistakes that people make is to hire a lawyer to send a "This office represents ..." letter with no intention of paying for full representation. It is wasted money. But I digress.

    On the other side of the argument, let us assume that the amount involved is a six-figure executive package. Depending upon the merits, that is enough to attract a skilled attorney who will be paid a contingency fee. Arbitration works against the employee.

    Arbitration addresses a specific problem: No one is ever at fault when they are terminated. It is part of the fabric of American life. Vexatious former employees sue their former employers routinely figuring that the "nuisance value" is greater than the amount involved. It is a form of extortion. The worker might be a pro per Internet lawyer but the employer needs to pay an attorney. Arbitration reduces these expenses.

  • loki13||

    "For example, let's say that a worker feels he was cheated out of $7,500. The amount is insufficient to attract an attorney on a contingency fee basis. Representation on an hourly fee basis may very well be more than the amount involved."

    Define "cheated out[.]" Many employment laws have specific provisions regarding attorney's fees that allow for recovery regardless of the American rule.

    Some of them quite terrifying (e.g., FLSA).

  • Joe_dallas||

    FWIW - Texas has an excellent wage claim procedure adminstered via the Texas Workforce commission. Rules of evidence are not near as strict which allows for inexperienced pro se employees to wade through the system. Also eliminates the problems with collecting a judgment due to the enforcement power of the TWC. Tilts the scales more evenly instead of in the favor of the employer.

    That being said, eliminating the ability to collect unpaid wages via the TWC (or other states similar statutes/procedures) due to limiting wage claims to arbitration does screw the worker.

  • loki13||

    Interesting.

    Did individuals with wage issues tend to go through the TWC, or file independent FLSA claims?

  • Joe_dallas||

    My knowledge is limited to 4-5 cases all brought through the TWC, though no first hand knowledge on any FLSA claims through either state or federal court so no comment on any FLSa claims. All the TWC filings were successful with little cost to the employee.

  • loki13||

    It sounds interesting.

    Private enforcement of the FLSA can be brutal for employers; I am quite sure that most good employers (and they do exist) would be perfectly happy paying out for honest mistakes or getting a low-cost adjudication of a difference of opinion (say, whether an exemption applies or not) rather than deal with the FLSA; and as for the bad employers, it should be easy for an employee to get their money.

  • Joe_dallas||

    I will add the cases I am familiar with dealt with were small employers who just refused to cut the final paycheck , not pay commissions per employment contract, alleged employee misdeeds, etc. - As Absaroka stated below "Sleazy employers"

  • NToJ||

    Workers don't like the TWC and they only file there because they have to. The failure to follow the administrative process usually robs them of standing in the courts. FLSA and qui tam are the real remedies in Texas.

  • NToJ||

    I should add these are for state law wage/employment claims.

  • David Nieporent||

    That being said, eliminating the ability to collect unpaid wages via the TWC (or other states similar statutes/procedures) due to limiting wage claims to arbitration does screw the worker.

    Joe, I am not an expert on Texas law (I once had a layover at IAH when I was traveling with my family on vacation, which is as close as I've gotten to practicing law there), but I would find it a bit atypical if an arbitration clause in an employment agreement prevented an employee from filing a claim with an administrative agency. In such instances, the agency itself is usually bringing the claim in its own name, and an arbitration agreement cannot preclude that. (That's certainly the case in NY and NJ, the two states where I stayed at a Holiday Inn Express last night.)

    The problem with the state agencies in NY and NJ is that, well, they are administered by government bureaucrats, who do not have an incentive to maximize recovery or to do so quickly. (Case that happens to be on my desk right now, a client filed a complaint with the NY DOL in May 2017; it was first assigned to an investigator only a year later. And all that means is that the investigator will show up at the employer's place of business sometime in the next few months.)

  • Joe_dallas||

    Texas apparently works much better than NY or NJ. In the cases I am familiar with, it was 3-4 months between the time of filing and the receipt of the check.

  • phoqueue||

    Many states likely have options at the administrative level to shift power back to employees. For instance, the state could suspend an employer's license (or other government permission slip) if it fails to properly pay employees. The administrative discipline could continue as long as the violation remains unresolved.

  • Absaroka||

    The references to FSLA litigation/arbitration have me wondering: my Dad's second career was a USDOL investigator. My sense from the dinner table conversations was that 1)the FSLA didn't cover much past min wage/time and a half/exempt issues, and 2)it was heavily weighted against sleazy employers. Essentially, when he darkened an employer's door, either as a result of a complaint or his intuition, the employer either had bulletproof records documenting compliance, or Dad would make up what he thought the records likely should have been and the employer paid back wages according to that reconstruction. My sense was that litigation wasn't needed; if you had a valid claim a phone call to DOL would get you the same results as litigation, without fees.

    Is DOL slacking off on enforcement, or has something else changed, or are folks talking about some other part of FLSA?

  • loki13||

    The FLSA is usually enforced privately nowadays (although the DOL can, and does, enforce it as well).

    The reason? Attorney's fees. The FLSA has the most punitive attorney's fees provision I can think of in any law; it's the equivalent of "heads I win, tails you lose." In short, the employer is paying for his attorney and the plaintiff's attorney.

    Which means that even the most small-money FLSA claim (you know, $100) is worth it for Plaintiff's attorneys. It's become an epidemic (like the ADA) in some parts of the nation.

    (In addition, some states have a longer state SOL for wage claims, so the enterprising Plaintiffs attorneys have been filing hybrid class/collective actions).

  • Absaroka||

    Thanks. That seems odd. My sense was that quite a few of my father's cases weren't the result of a complaint - the kind of shady employer who tried to chisel on min wage/overtime typically employed people who weren't knowledgeable enough to know they were being had. He could find those because the employer had to let him look at their records. I presume private attorneys don't have the ability to just walk into random businesses and inspect records; I hope those cases aren't just getting overlooked if the DOL is not in the business anymore.

  • loki13||

    Depends on the jurisdiction. Last time I looked at this a couple of years ago, there were three jurisdictions that really took the cake for FLSA litigation-

    Florida, NY, and Texas.

    Or, as some people might put it, Florida, Florida, Florida, Florida, and then NY and Texas. Seriously, it's been out of control in Florida for a while.

  • Joe_dallas||

    My prior comment appears to be in moderation

    As others have noted above - there are good arguments - both pro and con on whether class action vs suing in court v arbitration is good or bad policy and who benefits for the "forced arbitration Clauses"

    That being said - Ginsburg's bases her dissent on what she thinks is the better policy, not on the applicable statute.

    Same with her dissent in Encino Motors - The dissent is largely based on policy instead of the statute.

  • loki13||

    "That being said - Ginsburg's bases her dissent on what she thinks is the better policy, not on the applicable statute."

    Stop .... saying ... that.

    If you've read her dissent, you know that is not true. Moreover, if you read her dissent, you would know that anyone else that actually read the opinion knew you were making this up.

    If you didn't read the dissent, then you should do so before making stuff up.

    Regardless, if you want to be taken seriously, you have to be serious. You may disagree with her reading of the statute, of the majority's, but neither side is "just" arguing the better policy. Do better.

  • Joe_dallas||

    Except her dissent isnt supported by the NLRA statute

  • loki13||

    But it is. I mean, you and I can go back and forth on this, but it is completely within the scope of the language.

    The natural reading of it means that of course the dissent was right. That it was later in time than the FAA is even more evidence of same, for me. The majority's argument that Congress should have made it more explicit is total BS (IMO) because it was only the massive SCOTUS-inspired expansion of the FAA that would have put Congress on notice that this was even on issue; back in 1935, Congress had no idea that a conservative Court would so widely expand the FAA. :)

    Reasonable minds can differ. As a matter of law, I think the dissent is better. As a matter of my own personal life, I like the majority, because it helps my own practice, and because I don't think Congress is going to get around to re-writing some abusive provisions in the law ... and this allows you to contract around them.

    TLDR- personally, I like the majority. But I think that legally Ginsburg is right. Regardless, her opinion is not just her arguing policy.

  • bernard11||

    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.

    This claim makers no sense. What is this "renewed incentive?" As Thrax2 says, it looks like, if anything, the incentive is to make arbitration worse for the employee, not better.

  • loki13||

    I haven't seen the analysis of this yet, Bernard, but I do know that there is case law for certain areas of the law that are incredibly important in this context (like the FLSA) that require arbitration clauses to be fair to be enforceable.* I'm not sure what, if anything, has changed, and it may depend on the Circuit you are in.

    *Because of the underlying substantive law. I haven't looked at this in a couple of years.

  • bernard11||

    Even if so, Loki, how does this decision cause employers to improve the fairness?

  • loki13||

    Dunno.

    When I write "voluntary" arbitration clauses, I make them as completely one-sided and unfair for the entity paying me as the current law allows.

  • loki13||

    for the = for the benefit of

  • Drewski||

    Given that it's now settled law, I think the best ways to protect workers would be to establish state programs to assist workers with colorable arbitration claims and to strengthen arbitration oversight.

    I'm of mixed mind on the decision as policy - I share Ginsberg's concern about "yellow-dog" contracts but Epic Systems sits close to that line. Doesn't matter, though; it's the law now.

  • Rev. Arthur L. Kirkland||

    I sense that employment lawyers tend to pick one side of the fence (employers or employees) and practice exclusively on that side -- the labor law sections of large firms represent employers while smaller firms take one side or the other.

    Do any of the lawyers reported to contend that this decision might benefit employees represent employees?

  • loki13||

    "I sense that employment lawyers tend to pick one side of the fence (employers or employees) and practice exclusively on that side"

    Your sense is accurate.

    "the labor law sections of large firms represent employers"

    Yep.

    "Do any of the lawyers reported to contend that this decision might benefit employees represent employees?"

    HA HA! No.

    Well, I am sure that there is an attorney, somewhere, who represents employers and is all like, "Hey, employees, good news everyone! Remember all those papers you signed when you started working? Well, one of them meant that you CHOSE to waive any ability to bring a class action against us! And you also CHOSE to never be able to bring a court action against us! Instead, you exercised the POWER OF FREEDOM to go through a confidential, multi-step binding dispute resolution process that will include mediation and/or arbitration as necessary. I just want to gloat, um, erm, congratulate you on your choice!"

    It's possible, but only because blatantly lying doesn't seem to have repercussions nowadays.

  • Ridgeway||

    I am not sure why people think arbitration is some sort of defendant nirvana.

    They forget that the arbitrator has to get paid, and arbitrators don't come cheap. Single arbitrator fees can easily exceed $100k, and in CA, at least, the employer must pay 100% of that amount regardless of the outcome of the case. For all of the other flaws in our judicial system, the actual court costs in litigation are negligible.

    I personally think mandatory mediation is one of the better ideas to come along in a while. A good mediator can get a lot of cases resolved before either side has sunk so much cost that they cannot stomach settling for any amount.

  • loki13||

    "Single arbitrator fees can easily exceed $100k, and in CA, at least, the employer must pay 100% of that amount regardless of the outcome of the case"

    That is not the case in all jursidictions. While California (and the 9th) attempts to make arbitration more palatable, there is no requirement that the arbitration fees be paid by the employer. I'd point out that there have been a number of FAA cases from out west that have died a nasty death in front of SCOTUS.

    I would say that a fee-splitting agreement (with a severance clause as a backup) would be more than adequate in most places.

  • Ridgeway||

    I dont think that is true about fee splitting. Under AAA rules, as I understand them, the employer is reponsible for all costs other than the $300 filing fee (which must be waived for "poor" employees):

    [url]https://www.adr.org/employment[/url]

    [quote]Costs
    Under the Employment/Workplace Fee Schedule, the employee's or individual's fee is capped at $300, unless the clause provides that the employee or individual pay less. The employer or company pays the arbitrator's compensation unless the employee or individual, post dispute, voluntarily elects to pay a portion of the arbitrator's compensation. Arbitrator compensation and administrative fees are not subject to reallocation by the arbitrator except upon the arbitrator's determination that a claim or counterclaim was filed for purposes of harassment or is patently frivolous. [/quote]

  • loki13||

    "I dont think that is true about fee splitting. Under AAA rules, as I understand them, the employer is reponsible for all costs other than the $300 filing fee (which must be waived for "poor" employees):"

    Nope. That is optional. You opt into (or out of) whatever set of rules you want.

    The standard is, of course, that "an arbitration agreement is not unenforceable merely because it may involve some 'fee-shifting'" See Musnick v. King Motor Co. of Ft. Lauderdale, 325 F.3d 1255 (11th Cir. 2003). See generally Green Tree Fin. Corp.-Ala. v. Raqndolph, 531 US 79 (2000) (noting that the "risk that [a party] will be saddled with prohibitive costs it too speculative to justify the invalidation of an arbitration agreement.").

  • NToJ||

    Is there a California statute requiring all arbitration costs to be borne by the employer, regardless of the agreement's terms? I feel like that should be a preemption issue.

  • Ridgeway||

    Not sure if it statutory or case law, but it is pretty black-letter in CA that the employer has to pay all the arbitration costs. Several recent CA cases have found arbitration clauses that contain arbitration cost-splitting provisions to be unconscionable. I think this is even true for executive-level "negotiated" arbitration clauses. AAA and JAMS have similar requirements in their rules for "Employer Plan" arbitration clauses, but nor for exec ones..

    Note also that CA has the "heads I win, tails you lose" rule on attorney fees in employment cases. If the employee wins, they get their fees, but if the employer wins, they have no recourse to the defendant, and that rule should control in an arbitration as well. I don't even think there is even a frivolousness exception, or if there is, it has been read out of existence.

  • Joe_dallas||

    Bernard11 - Employers have plenty of incentive to cheat on wages. If the only potential cost is having to pay what they should have to begin with that encourages bad behavior.

    Incentives such as
    1) lower worker productivity
    2) higher employee turnover
    3) higher employee replacement costs
    4) lower employee morale
    5) missed deadlines because workers wont care

  • bernard11||

    And yet, Joe, they do cheat. Not all of them, or even most, but some.

    Maybe it's just the stupid ones, but I doubt it. Remember, in most cases we are talking about low-level workers who many companies see as nearly fungible. Don't like it? I'll hire someone else.

    I mean you could make the same argument about pay scales. I say, "Employers have an incentive to keep wages as low as possible." You say, "They don't because of all the bad things that could be avoided by paying more."

  • ReaderY||

    When Congress enacted the FAA, it would have been unimaginable that employment or consumer contracts would ever be subjected to it, as such matters were not within the scope of interstate commerce.

    A consequence of the recent #metoo revelations has been increased awareness that a network of arbitration, confidentiality, and similar agreements has enabled alpha males to rape with impunity, with victims precluded even from calling law enforcement, and with employers routinizing procedures in a way that made preying on lesser females practically a fringe benefit of high executive status, making a mockery and a nullify of laws intended to prohibit such behavior.

    When it leads to consequences as egregious as these, a system of arbitration that lets powerful corporations write the rules, pick the arbitrators, and give future work to those arbitrators who favor them, and issue gag orders to the employees involved may be a correct reading of the statute. But it certainly isn't a win for employees.

  • phoqueue||

    ...people who get fired or denied agreed-upon wages will almost always show up in court or arbitration.

    No. People rarely file any sort of claim for individually small amounts of money. That's precisely why it's easy (and now easier) for employers to engage in widely distributed wage theft.

  • phoqueue||

    [class actions] are not always an effective way to ensure those with legitimate claims receive actual compensation.

    Of course, compensation isn't the only benefit. Deterring bad behavior is a nice benefit of class actions.

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