WASHINGTON, D.C. — An attorney for Epic Systems argued in front of the U.S. Supreme Court Monday that the company’s policy requiring employees to sign individual arbitration and confidentiality agreements does not violate those employees’ rights under federal law.
Paul D. Clement, a D.C.-based attorney representing Epic and Ernst & Young, argued that both companies, when they require employees to sign arbitration agreements, are not stripping employees of their rights because the agreements do not violate the National Labor Relations Act.
Epic, along with Ernst & Young and Murphy Oil USA, were the employers at the center of a one-hour consolidated oral argument Monday over their practice of forcing employees to sign individual arbitration agreements upon hire.
In the workplace, arbitration agreements are contracts that bar employees from taking grievances to court. Instead, the contracts require that such grievances are heard in front of company-appointed arbiters who decide the outcome of the complaint.
In Epic’s arbitration contracts, employees are also barred from banding together to file complaints and must sign confidentiality agreements.
The cases present a conflict between the National Labor Relations Act of 1935, and the Federal Arbitration Act, of 1925. Questions from the justices focused on whether individual arbitration agreements violate the National Labor Relations Act, or whether they’re OK because of the Federal Arbitration Act.
The NLRA, in part, states that employees have “the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purposes of collective bargaining or other mutual aid or protection.” It also provides employees with “the right to refrain from any or all such activities.”
The Federal Arbitration Act states that arbitration agreements “shall be valid, irrevocable, and enforceable.” Epic’s attorneys said that law shines brighter in this case.
The court’s ideological divide surfaced quickly during discussion. Liberal-leaning justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor fired questions at Epic’s attorneys, while the conservative justices remained mostly silent. The dynamic reversed when the employees’ attorneys spoke.
Justice Breyer argued that the NLRA's language is clear. He said a ruling in favor of Epic could undermine decades of labor law and protections for workers.
“I’m worried your case would overturn labor law,” Breyer said. “I want to see a way you can in fact win the case without undermining and changing radically what has been going back to the New Deal.”
Justice Ginsburg said Epic’s arbitration agreement is tantamount to "yellow-dog contracts," or contracts that prohibited employees from joining unions. They were popular in the 1920s.
“It has all the essential features,” Ginsburg said.
Such contracts were later outlawed by the Norris-LaGuardia Act of 1932, which state that employees should have “full freedom of association undisturbed by employers.”
Other justices sought clarification, dissecting what constituted “concerted activities,” under the law.
“What is the scope of the right to engage in a concerted activity?” Justice Samuel Alito asked.
Kagan later answered: “Of course (the National Labor Relations Act) doesn’t extend to the ends of the earth … it establishes a set of rules for how employers deal with employees.”
Justice Anthony Kennedy asked whether three employees who have similar, though not the same, workplace complaints could all use the same attorney for different cases. Would that be a concerted activity? he asked.
Kagan and Ginsburg later said it was not the same thing as being able to file a lawsuit as a group.
Clement argued that individual arbitration agreements are legal because they protect an employee’s right to file a complaint. The action of filing a complaint is allowed by those agreements, but it does not a guarantee a specific type of hearing or a specific forum for that complaint. Therefore, he said, an arbitration agreement is legal because it still provides an avenue for an employee to make a complaint.
“It’s just an effort by employers to set the rules of the forum,” Clement said. “There’s nothing sinister in a bilateral agreement.”