U.S. Supreme Court upholds arbitration clauses in employment contracts

A new decision out of the high court is seen as pro-employer.

In a recently posted article, we talked about arbitration clauses in employment contracts that require, as a condition of employment, that employees waive their rights to file lawsuits and government agency claims of sexual harassment and potentially other kinds of legal claims. Instead, the employment contract provides that such complaints will be resolved through arbitration and remain confidential.

Arbitration is a private dispute-resolution method in which a neutral third party, called an arbitrator, acts like a private judge who hears both parties' arguments, weighs evidence and issues a (usually) binding decision.

Impact of #MeToo

These clauses have been roundly criticized in light of recent revelations of the extent of the problem of sexual harassment in the workplace because employees are prevented from speaking out about their victimization and from seeking redress in court.

As we said in our previous article, all 50 state attorneys general have collectively asked Congress to pass a law forbidding arbitration clauses for sexual harassment allegations and, in California, a bill is pending in the legislature that would do the same for sexual harassment complaints under state law.

U.S. Supreme Court favors employers

Since that article, the U.S. Supreme Court issued on May 21 an opinion in Epic Systems Corp. v. Lewis that upholds arbitration clauses under the Federal Arbitration Act or FAA, saying that a later-passed provision in the National Labor Relations Act or NLRA guaranteeing that employees may band together for "mutual aid and protection" does not negate these arbitration clauses. The court said that the mutual aid envisioned in the NLRA does not include the right to bring class actions or other jointly filed lawsuits against employers.

This decision is seen widely as pro-employer. SCOTUSBLOG reports, for example, that "it could significantly reduce the number of claims" against employers. The court opinion says that if Congress disagrees, it can pass legislation to change the result.

Significantly, Justice Ruth Ginsburg wrote a scathing dissent, which she read in court, a rare action that emphasizes her fierce opposition to the holding.

California legislation

In an update to the California legislation (AB-3080) that would forbid such clauses for sexual harassment claims based on state law, after the decision in Epic Systems, the state bill passed the Assembly on May 30 and it was introduced to the state Senate the next day. As of the time of this writing on June 16, it has been referred to two Senate committees for consideration.

In the meantime, anyone experiencing sexual harassment at work, whether through direct verbal or physical aggression or in a sexually laced hostile work environment, should speak immediately with a lawyer about what legal remedies are available, regardless of whether there is an arbitration clause in place or not. This area of law may change quickly and a knowledgeable attorney should be consulted,

It is also a good idea to talk to an attorney before signing an employment contract that contains an arbitration clause.