An Epic Year? High Court’s Class Waiver Ruling Turns 1

Law360 - Braden Campbell
May 21, 2019

The U.S. Supreme Court’s decision to bless class action waivers in Epic Systems Corp. v. Lewis was seen as a clear-cut win for employers, but on its first birthday, practitioners say the decision’s impact has been muted as businesses weigh the potential costs of arbitration and growing public backlash against denying workers a day in court.    

The high court’s May 21, 2018, decision held that making workers sign arbitration agreements waiving their rights to pursue class actions does not violate the National Labor Relations Act, cementing employers’ ability to funnel wage-and-hour and discrimination claims to solo arbitration instead of court. Businesses see that as an attractive option because arbitration isn’t public and individual claims aren’t likely to yield the eye-popping damages awards that a successful class action can bring.  

But  while the legality of class waivers had long been a hot-button issue and the Epic Systems case was closely watched, it looks like last year’s decision hasn’t had a significant impact on the litigation landscape at least not yet. The overall number of Fair Labor Standards Act cases filed between May 21, 2018, and May 17 of this year dipped only slightly when compared with the previous year.    

Now that they’ve won a green light from the nation’s highest court to use mandatory class waivers to limit legal exposure, companies are taking a hard look at the business justification for requiring workers to arbitrate.

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Plaintiffs’ Pivot

The Epic Systems ruling may have made it easier for businesses to ward off class and collective actions, but it hasn’t stopped plaintiffs attorneys from pressing claims for groups of workers.

Justin Swartz, co-chair of plaintiff-side firm Outten & Golden LLP’s class action group, said his firm and others have pivoted to “mass arbitration,” filing dozens or hundreds of solo arbitration demands against employers they would have otherwise pursued via class action.

Class actions can be costly for employers because they consolidate hundreds or thousands of claims for damages. But the mechanism offers employers two benefits, Swartz said: efficiency and finality. That is, employers can defend against all their accusers at the same time and potentially beat every claim with a single judgment. But arbitration, in which each case is individual and its resolution doesn’t bear on others, offers neither, Swartz said.

To the extent they adopted arbitration agreements with class action waivers en masse after Epic,  “I think a lot of employers are finding they got bad advice,” he said.

And because employers must generally foot the arbitration provider’s bill, that advice is already proving costly for some, said Matthew Helland, a partner at plaintiff-side Nichols Kaster PLLP. Helland said one employer his firm has challenged in more than 70 individual arbitrations was recently hit with a six-figure filing fee by the American Arbitration Association, which is one of the leading arbitration providers.

“Those filing fees will just continue to grow as we continue to file more individual arbitrations,” Helland said.

Swartz and Helland’s foes on the management side say the mass arbitration strategy isn’t set up for long-term success, however.

“They don’t really have many other options right now,'” McDermott’s Sheehan said. He also said plaintiffs attorneys may have a tough time rustling up claimants going forward, speculating that much of the mass arbitration going on now was filed for workers that attorneys had already contacted through class actions pre-Epic.

Swartz conceded it’s “obviously easier” for attorneys to translate existing classes to mass arbitration. “But I guess I would just say, ‘Try us and see what happens,'” he said.

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