This article is Part 2 of a two-part series providing an overview of recent United States Supreme Court decisions in employment law.
We continue below with brief summaries of the U.S. Supreme Court’s key employment law opinions. We also preview the employment law-related cases that Court has accepted for review for the upcoming Term.
Epic Systems Corp. v. Lewis (May 21, 2018)
Epic Systems Corp.’s and its employees’ arbitration agreements required the employees to resolve any claims against it individually, rather than collectively. In other words, employees who agreed to arbitrate could not bring class actions lawsuits or claims in arbitration against Epic.
Lewis, a former Epic employee, sued Epic individually and on behalf of a class of similarly-situated employees. The plaintiffs claimed Epic wrongfully denied employees overtime wages. Epic sought to compel Lewis to arbitrate his claim individually, based on the class action waiver in the agreements.
The Federal Arbitration Act generally requires courts to enforce arbitration agreements. But Lewis argued that a class action waiver violates the National Labor Relations Act (the “NLRA”), a federal law that the Arbitration Act would not preempt. The NLRA guarantees to employees, among other things, a right to concerted activity for mutual aid and protection.
The Supreme Court disagreed with the employees’ position that the NLRA prohibits enforcement of class action waivers in arbitration agreements governed by the Federal Arbitration Act. The Court reaffirmed that courts must enforce arbitration agreements according to their terms. Nothing in the NLRA referred to class action litigation procedures as a form of concerted activity. Thus, class action waivers in arbitration agreements remain enforceable under the NLRA.
This decision does nothing to change the law regarding arbitration of claims under California’s Private Attorney General Act or “PAGA.” PAGA claims remain non-arbitrable under typical arbitration agreements because a PAGA claim is brought in the name of the state, which is not a party to an arbitration agreement between employer and employee.
Wisconsin Central Ltd. v. United States (June 21, 2018)
Wisconsin Central, a railroad, provides stock options to its employees as a form of compensation. These stock options are taxed under the Railroad Retirement Tax Act (“RRTA”), which federalized private railroad pension plans.
The RRTA states that any “money remuneration” paid to railway employees is subject to an excise tax equal to a stated percentage of the employees’ wages. Wisconsin Central claimed that the taxation of these stock options under the Act is improper, as it misapplies the statutory definition of “money remuneration.”
The Supreme Court agreed, holding that employee stock options are not “money remuneration” under the RRTA, and therefore are not taxable compensation under the Act. It remains to be seen whether the Court’s reasoning will be extended to stock option compensation when the RRTA does not apply.
Janus v. American Federation of State, County, and Municipal Employees, Council 31 (June 27, 2018)
The Supreme Court ruled that public-sector employees who choose not to join their workplace’s union as a full member cannot be required to pay “fair share” or agency fees. Those fees, a portion of the full membership dues, are intended to cover the union’s costs of bargaining activity and contract administration that apply to all employees.
The Court overturned a 1977 case involving a Michigan law, Abood v. Detroit Board of Education. In that case, the Court had held that public employees who did not belong to their workplace union nevertheless could be required to pay the agency fee, because the employees benefited from the union’s negotiated collective bargaining agreement, as well as the union’s bargaining and administration work.
In Janus, involving an Illinois law, the Court’s majority explained that requiring payment of agency fees would be tantamount to requiring employees to endorse and subsidize speech or ideas with which they disagree. The Court held that this requirement runs counter to the First Amendment. This decision may affect public sector unions’ ability to raise funds, as it is predicted employees will be unwilling to voluntarily pay agency fees. It is unknown whether the Court will extend Janus’s rationale to private sector employees who opt out of full union membership.
Cases on the Docket for the October 2018 Term
As of this writing, the Supreme Court has granted review of three employment law-related cases for its upcoming Term that begins in October 2018.
The Court in Mount Lemmon Fire District v. Guido will consider whether, under the Age Discrimination in Employment Act (“ADEA”), the same 20-employee minimum that applies to private employers also applies to political subdivisions of a state (as the Sixth, Seventh, Eighth, and Tenth Circuits have held) or whether the ADEA applies instead to all state political subdivisions of any size (as the Ninth Circuit held in this case).
In Varela v. Lamp Plus, Inc., the Court will decide whether an employment arbitration agreement that is silent regarding the arbitrability of class actions permits employees to arbitrate on a class wide basis. The Court previously held in Stolt-Nielsen v. Animalfeeds International Corp., that a commercial arbitration agreement, silent as to whether class actions are available, precludes arbitration of class actions.
In New Prime Inc. v. Oliveira, the Court will decide (1) whether a court or arbitrator must determine the applicability of Section 1 of the Federal Arbitration Act, and (2) whether that provision, which applies only to employment contracts, includes independent contractor agreements. Of course, the Court may accept additional cases as the Term progresses.