New Battles and Battlegrounds for Mandatory Arbitration After Epic Systems, New Prime, and Lamps Plus

• Date: 01 December 2019
• Author: Stephanie Greene,Christine Neylon O'Brien
• Published date: 01 December 2019
• DOI: http://doi.org/10.1111/ablj.12152

American Business Law Journal

Volume 56, Issue 4, 815–878, Winter 2019

New Battles and Battlegrounds for

Mandatory Arbitration After Epic

Systems,New Prime, and Lamps Plus

Stephanie Greene*and Christine Neylon O’Brien**

The Supreme Court’s recent decisions interpreting the Federal Arbitration

Act (FAA) in the employment context generally prioritize arbitration over

workers’ labor law rights. The majority in Epic Systems Corporation

v. Lew i s upheld mandatory individual employment arbitration agreements

despite their conflict with the labor law right to act in concert. The same

majority in Lamps Plus, Inc. v. Varela rejected a state law interpretation

of a contract provision to find that parties to an employment contract intend

individual arbitration absent reference to group arbitration. A unanimous

Court in New Prime v. Oliveira interpreted the FAA to include indepen-

dent contractors under the transportation worker exemption, reinvigorating

the battle over what it means to be engaged in interstate commerce to qualify

for the exemption. These decisions resolved some disputes about the breadth

of the FAA, but other questions remain. In the wake of Epic Systems and

Lamps Plus, state courts and legislatures are testing the boundaries of the

FAA’s saving clause, with limited success. Confidentiality provisions, fre-

quently associated with arbitration agreements, may unlawfully interfere with

employees’ federal labor law rights. This article recommends that Congress

amend the FAA to address these issues by excluding all workers engaged in

interstate commerce, not just transportation workers, because the Court has

strayed far from the original intent of the Act—to enforce commercial agree-

ments in which the parties had equal bargaining power. State legislation

also should provide guidance on what makes arbitration voluntary and fair,

*Professor, Business Law, Carroll School of Management, Boston College.

**Professor, Business Law, Carroll School of Management, Boston College.

©2019 The Authors

American Business Law Journal ©2019 Academy of Legal Studies in Business

815

and provide a choice to employees on collective action, forum, and

confidentiality.

INTRODUCTION

Workers and consumers are increasingly required to waive their

right to go to court when they sign employment contracts.

1

Employers may insist not only on arbitration, but also on individual

or bilateral arbitration, thereby prohibiting class actions or other

methods of cooperation between workers to address workplace griev-

ances.

2

Arbitration is often a suitable, fair, and expeditious means of

resolving employment disputes. Nevertheless, most employees have

little bargaining power in negotiating the arbitration agreement or

any meaningful choice in deciding whether or not to accept such

agreements.

Businesses frequently favor arbitration because this method of

resolution is less expensive, less time consuming, and confidential.

3

They also are concerned with prohibiting expensive class action

suits.

4

However, from an employee or consumer perspective,

1

Katherine V.W. Stone & Alexander J.S. Colvin, The Arbitration Epidemic:Mandatory

Arbitration Deprives Workers and Consumers of Their Rights,E

CON.POL’YINST.15(Dec.

7, 2015), https://www.epi.org/publication/the-arbitration-epidemic/. Stone and Colvin

estimated that at least a quarter of all nonunion employees are covered by mandatory

arbitration agreements. Id. Also in 2015, the Consumer Financial Protection Bureau

found that tens of millions of consumers are covered by arbitration clauses in con-

sumer financial products. CONSUMER FIN.PROT.BUREAU,ARBITRATION STUDY:REPORT TO

CONGRESS,PURSUANT TO DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION

ACT § 1028 (A) 9 (2015). A 2017 study by Alexander Colvin showed that more than half

of private sector nonun ion employees are cover ed by mandatory arbitr ation. See Alexan-

der J.S. Colvin, The Piper Lecture:The Metas tasization of Mandatory Arbitration,94C

HI.-KENT

L. REV. 3, 9–10 (2019).

2

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018).

3

See Ann C. Hodges, Contents:Employee Voice in Arbitration,22EMPL.RTS.&EMPLOY.POL’YJ.

235, 237–41 (2018) (discussing benefits for employers and detriments to employees of man-

datory individual arbitration).

4

Id. at 238.

816 Vol. 56 / American Business Law Journal

mandatory arbitration may seem unfair.

5

Not only does the individ-

ual surrender her right to a jury trial, but she also is prevented from

joining forces with similarly situated employees or consumers.

6

An

individual may forego arbitration andthusanyrecoveryforanalleged

violation of rights because the amount of money involved in a single

claim is not worth the cost of retaining an attorney.

7

Employees may also

forego solo arbitration because they fear retaliation by employers.

8

Moreover, studies show that employers are more likely to prevail

in arbitration because arbitrators are keen to retain their business.

9

Mandatory arbitration is an important issue because more than half of

private sector nonunion workers are subject to mandatory arbitra-

tion.

10

Inaddition,lowwageworkersarethemostlikelytobesubjectto

mandatory arbitration.

11

Several U.S. Supreme Court decisions have had a strong impact on

the rise of mandatory arbitration provisions. Over the past few decades,

5

Professor Jean Sternlight has written extensively about the unfairness of arbitration agree-

ments that are presented to consumers and employees on a take-it-or-leave it basis. SeeJean

R. Sternlight, The Rise and Spread of Mandatory Arbitration as a Substitute for the Jury Trial,

38 U.S.F. L. REV. 17, 24–25 (2003).

6

See Epic Sys., 138 S. Ct. at 1637 (Ginsburg, J., dissenting) (asserting the right to pursue collective

action such as litigation is a section 7 right under the NLRA); Hodges, supra note 3, at 238 (dis-

cussing arbitration’s disadvantages such as loss of right to jury trial where jurors are more likely

to sympathize with employees, and lawyers less likely to represent without access to jury).

7

See Hodges, supra note 3, at 238–39 (noting that lone employees are less likely to prevail in

arbitration and lawyers less inclined to represent these employees).

8

See id. at 238 (arguing apprehension of retaliation a likely deterrent to individual claims);

cf. Epic Sys., 138 S. Ct. at 1647 (Ginsburg, J. dissenting). It makes sense that employees

would dread retaliation from employers, particularly where their recourse to redress that

retaliation is more employer-controlled arbitration.

9

David Horton & Andrea Cann Chandrasekher, Employment Arbitration After the Revolution,

65 DEPAUL L. REV. 457, 465, 484 (2016) (analyzing 5,883 employee-initiated arbitrations

filed with the AAA from July 2009 to December 2013 and finding that employer defendants

in seventy-two percent of the arbitrations were repeat players).

10

See ALEXANDER J.S. COLVIN,THE GROWING USE OF MANDATORY ARBITRATION:ACCESS TO THE

COURTS ISNOW BARRED FOR MORE THAN 60 MILLION AMERICAN WORKERS 2 (2018); KATE

HAMAJI ET AL., UNCHECKED CORPORATE POWER:FORCED ARBITRATION,THE ENFORCEMENT CRISIS,

AND HOW WORKERS ARE FIGHTING BACK 1 (2019) (noting “by 2024, more than 80 percent of

private-sector, non-union workers will be blocked from court by forced arbitration clauses

with class- and collective-action waivers”).

11

See COLVIN,supra note 10, at 9.

2019 / New Battles and Battlegrounds 817