Wednesday, June 6, 2018

Quoted in HR Dive on Arbitration (Plus Additional Commentary)

Important information from the Lawffice Space Department of Important Information: HR Dive quoted me extensively in Lisa Burden's article, Employers Shouldn't Rush to Adopt Arbitration Agreements in Light of 'Epic,' Experts Say. It's a good article with some nice insight from others as well.The article relates to the Supreme Court's recent ruling in Epic Systems (see, Supreme Court Okays Class Action Waivers in Arbitration Agreements). 

For those of you  who just can't get enough, here are my full comments:

On when employers should use arbitration

Not everyone likes arbitration. I happen to like it. Generally (though not always), arbitration will be faster and cheaper. Employers can also agree to confidentiality, and select a convenient geographic location. The big development in this case is that arbitration agreements can also mandate one-on-one arbitration, effectively precluding class or collective actions. Class actions, like state wage and hour laws for example, are generally “opt out” – meaning that employers can be on the hook for people who have never (and otherwise never would have) filed a claim. Even FLSA collective actions (which are “opt in”) may draw in employees who would not ordinarily file their own claims, but would opt in to a collective action. One-on-one arbitration agreements are a way to prevent any liability for those employees.

There are some downsides to arbitration. For example, there are very limited appeal options (great if you win, not-so-great if you lose). Also, employers may face serial claims that would be better handled in one consolidated class or collective case. Every time I say arbitration is faster and cheaper, somebody tells me I’m crazy – sometimes it is, sometimes it isn’t (I still think *on average* it’s faster and cheaper). You face the prospect of fractured rulings – you may win one case, but then lose the next one even though the facts (other than the identity of the employee) are exactly the same.

Others have pointed out that employers may face backlash from forcing employees into secret one-on-one arbitrations. For example, the #MeToo movement has been very critical of serial harassers essentially evading detection because their cases were repeatedly resolved in confidential proceedings, or with confidential settlement agreements.

Employers have many options though. They can require one-on-one arbitration, or allow collective actions. They can use jury trial waivers to avoid jury trials, but still litigate in court. Ultimately, employers should consult with their attorneys regarding their options. In my humble opinion, employers will generally be better off with arbitration agreements – especially if they can avoid class or collective actions.

On whether the Epic Systems ruling extends beyond the NLRA

Yes. The parties challenging the arbitration agreements focused on the NLRA (in Epic Systems). Their theory of the case was that the NLRA protects employees’ rights to engage in “concerted activities,” which they argued includes the right to bring class and collective actions – including class and collective actions under other statutes. In fact, Epic Systems itself was originally filed as an FLSA claim for unpaid overtime. Epic Systems sought to compel arbitration, but the District Court held that the waiver of class and collective actions in the arbitration agreements was unenforceable because it violated the NLRA right of employees to engage in concerted activities. In fact, Epic Systems is actually three cases consolidated by the Supreme Court. All three cases arose from FLSA wage and hour (overtime) collective actions (although NLRB v. Murphy Oil was separately filed as an unfair labor practice charge with the NLRB). Also, at least one of the cases (Ernst & Young LLP v. Morris) included a class action claim for overtime under California state law.

So, yes, this ruling is broad and will impact other labor and employment law cases outside of the NLRA. The heart of the holding is that employers and employees can enter into arbitration agreements that require individual (i.e. one-on-one) arbitration to resolve employment disputes. If an employee who signed such an agreement files a class or collective action claim in court, the employer can compel one-on-one arbitration instead. This result is driven by the FAA (Federal Arbitration Act), and is not specific to any one labor and employment law.

On whether Congress will do anything about it

This decision came with a fair amount of controversy. However, most of the criticism came from the “left” side of the political spectrum; and the four dissenting Supreme Court Justices were the traditional “liberal bloc.” In her dissent, Justice Ginsburg expressly calls for “Congressional correction.” However, realistically, the ideological opponents of this decision are simply not in power. Democrats hold only a minority of the House and Senate; and, of course, President Trump is a Republican. In this case, the Office of the Solicitor General actually switched positions after the changeover from President Obama to President Trump, and ultimately supported the employer side. Presumably, that is an indication of President Trump’s view of the case. In short, I doubt we’ll see legislative action any time soon.