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The Effects of Recent Supreme Court Decisions on Employers
Epic Systems v. Lewis & Janus v. AFSCME
So far, 2018 has marked a major year of U.S. Supreme Court decisions that affect the employer-employee relationship. Two recent decisions of the Court both have an impact on how an employer manages its business and engages with its employees.
First, in Epic Systems v. Lewis, the U.S. Supreme Court consolidated three cases to address the issue of whether an employee’s employment contract can require the employee to resolve his/her dispute individually in arbitration, rather than a class action or a “banding together” lawsuit in court. The Supreme Court held that companies were allowed to include these arbitration clauses in their employment agreements, essentially preventing employees from filing class action lawsuits together over a disputed issue. See Epic Systems Corp. v. Lewis, 138 S.Ct. 1612, 1632 (2018).
In the 5-4 majority opinion, newest Supreme Court Justice Neil Gorsuch stated the holding was based on federal law that favors arbitration. In particular, he reasoned that if workers were allowed to band together to make their claims, “the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace.” Id. at 1623. By this decision, the Supreme Court confirmed an employer can require all employee disputes be resolved individually though arbitration rather than by formal judicial process that can include class action lawsuits.
The decision is estimated to potentially affect millions of employment contracts, so employers should be aware that individual arbitration clauses are likely to be found enforceable and appropriate. Arbitration clauses similar to what was at issue in Epic Systems are a newer innovation, but with the rising costs, time, and efforts of resolving these issues in formal court proceedings, many non-union employees are already subject to these arbitration provisions and required to sign class action waivers. To the extent these clauses are not already in use, an employer should now evaluate if this is an option worth pursuing in light of Epic Systems’ supportive language.
Second and more recently, in Janus v. AFSCME, the U.S. Supreme Court held that public sector workers cannot be compelled to pay fees to a union they don’t wish to join. This decision relied and agreed with the First Amendment arguments presented by the employee who pursued this suit. See Janus v. American Federation of State, County, and Mun. Employees, Council 31, 138 S.Ct. 2448, 2469 (2008). While the Janus decision, which involved an Illinois public sector employee, did not extend to private sector employees, those employers should nonetheless be aware that many labor and employment experts now believe that private sector employees will use the reasoning supporting Janus to argue that a similar ruling against private sector unions is also appropriate.
Most consider this decision a blow to organized labor given that workers will no longer have to pay union fees, but can still reap the contract benefits that a union negotiates for the workers. Organized labor’s response has focused on organizational and educational campaigns, with the objective of ensuring that current and potential union members understand the value of being a union member and the need to keep those organizations strong and well-funded.
Post-Janus, an important thought for employers is that with the potential decline of public sector employee union membership, unions may attempt to ramp up efforts to organize private sector employees. Some recent examples of private sector organizing groups are adjunct university professors and graduate student teaching assistants. See e.g. The Trustees of Columbia Univ. in the City of N.Y. and Grad. Workers of Columbia-GWC v. UAW, 364 NLRB No. 90 (2016). Private sector employees are governed by the National Labor Relations Act, so employers should be aware of the potential of private sector employee organizing and their obligations under the NLRA as well.