Employers Aim to Thwart Class Actions as High Court Term Begins

(Bloomberg) -- The U.S. Supreme Court opens its new term Monday with a reinforced conservative wing and a case that could give employers a powerful new tool to prevent their workers from filing class-action lawsuits.

At issue is whether employers can enforce promises they extract from workers to pursue grievances as individual arbitration cases, rather than as group lawsuits in court. The justices will hear arguments in three disputes involving wage-and-hour claims, and the ruling probably will apply to discrimination cases as well.

Over the past decade the Supreme Court has backed arbitration agreements between companies and consumers or other businesses. But employee advocates say workplaces are different because of a federal labor law that gives employees the right to engage in "concerted activities" -- a guarantee some judges have said includes class actions.

Past cases suggest the latest fight will divide the court along ideological lines. That means the newest justice, Donald Trump appointee Neil Gorsuch, could cast the pivotal vote in favor of arbitration.

"Arbitration has really been one of the fault lines on the court ideologically," said Greg Garre, a Washington appellate lawyer who served as President George W. Bush's top Supreme Court lawyer.

Companies say arbitration is more efficient and less expensive than traditional litigation, reducing the pressure to settle meritless cases. Critics say arbitration -- particularly when it includes a ban on class actions -- can strip litigants of important rights and make small claims all but impossible to press.

Feds vs. Feds

The Trump administration is backing the employers. But in an unusual twist, the National Labor Relations Board is set to argue on the side of the workers, defending its longstanding position that arbitration agreements can't prohibit group claims. Although NLRB now has a Republican majority, its general counsel, Richard Griffin, is a Democratic appointee and is scheduled to argue the case.

With Deputy Solicitor General Jeffrey Wall on the other side, it will be the first time in at least 25 years that two federal government lawyers have squared off against each other in a Supreme Court argument, Justice Ruth Bader Ginsburg said recently.

The case turns on the intersection of two longstanding federal statutes: the 1935 National Labor Relations Act, which contains the provision protecting "concerted activities," and the 1925 Federal Arbitration Act, which says judges must enforce arbitration accords like any other contract.

The court will use three cases to decide the issue. One is an appeal by the NLRB in a fight over alleged underpayments to four workers at an Alabama gas station run by a Murphy USA Inc. unit. The NLRB concluded the company engaged in an unfair labor practice by refusing to let the workers pursue their claims together. A federal appeals court threw out the board's finding.

The court will also consider an appeal from Epic Systems Corp., a health-care software company being sued by Jacob Lewis, an employee who says the company misclassified him and other technical writers so that they wouldn't be eligible for overtime.

The third appeal was filed by the accounting firm Ernst & Young LLP, which is fighting allegations that it also misclassified thousands of employees to make them ineligible for overtime pay.

The cases are Epic Systems v. Lewis, 16-285; Ernst & Young v. Morris, 16-300; and NLRB v. Murphy Oil USA, 16-307. The court will decide all three by June.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Laurie Asséo, Michael B. Marois