Supreme Court upholds workplace arbitration, and it’s Epic

My latest at Cato on this week’s decision upholding agreements to individually arbitrate wage and hour claims, in Epic Systems Corp. v. Lewis:

Yesterday’s 5-4 Supreme Court decision upholding agreements to individually arbitrate wage-and-hour claims was neither surprising nor novel as a legal matter. Nor – notwithstanding the variously breathless, furious, and apocalyptic reactions it has drawn from stage Left – is it objectionable as a matter of policy, or “anti-worker.” It is pro-liberty, pro-contract, and pro-respect for private ordering….

NPR, which really should know better, misreported on Twitter that “The Supreme Court in a 5-4 vote has delivered a major blow to workers, ruling for the first time that workers may not band together to challenge violations of federal labor laws,” of which the first eight words count as accurate reporting, the next half-dozen as erroneous opinion, and the remainder as merely false in fact….

…an oft-heard argument is that a contract presented as a take-it-or-leave-it matter, as is typical of employer handbook policies, credit card terms and the like, doesn’t count as a “real” contract and is entitled to no respect as a matter or law or, presumably, from libertarians. … Properly evaluating that claim is a task for another occasion, but my colleague Andrew Grossman is surely right when he points out that every hour of the day workers choose to accept overall employment packages including some terms they welcome (health insurance coverage, paid vacations) along with others they may not (some weekend hours required, don’t take staplers home) and that the lack of dickering over individual terms does not mean that they are not voluntary or have somehow been imposed by force.

Whole thing here. As I wrote after Italian Colors, millions of people “sign away their class action rights not because they are all hoodwinked or coerced, but because at some level they have rational grounds to recognize that” those rights are mostly of value to the class action industry.

Speaking of Italian Colors, the outcome in Epic Systems would surely have been no different had Scalia lived, since he led the way on the Court toward respecting contractual arbitration clauses and upholding the broad scope of the Federal Arbitration Act. More from Archis Parasharami and Dan Jones at SCOTUSBlog: “The best available empirical evidence shows that employees who arbitrate their claims are more likely to prevail than those who go to court, and to obtain awards that are the same as or larger than court awards in a shorter amount of time.” More: James Copland.


  • As one of those social media impliers, I’m perfectly happy to say it explicitly: I believe modern consumer and workplace relationships, due to contracts of adhesion, have no moral basis in autonomy and I see no moral basis to value freedom of contract.

    • But forcing people into the hands of class-action attorneys is moral?

      • It is if you’re a class-action attorney.


  • This was not a surprising decision, other than the fact that it was written by Justice Gorsuch and it clearly did not take into account the original intent of the authors of the NLRA, who most assuredly would have intended that the act would overrule the FAA. It is a bit hypocritical on his part. Only a bit, because it is possible that the authors of the FAA would have wanted this result. I am unclear on that matter, because I think that this was passed more as a measure to affect businesses with relatively equal sophistication and bargaining power than as allowing free-for-all rights to contract out of the right to go to court.

    Mr. Olson writes: “millions of people ‘sign away their class action rights not because they are all hoodwinked or coerced, but because at some level they have rational grounds to recognize that’ those rights are mostly of value to the class action industry.”

    I respectfully call BS. Those who sign away their rights don’t think about the class action industry. Instead, in effect, many people sign away their right to class actions in exchange for an implicit payment from the other side. To wit: purveyors of goods offer lower prices and employers offer higher salaries. The problem is that the consumers and employers are effectively forced to do so and we do not know how much they are paid.

  • Steve – I might be inclined to see some merit in the cell phone scenario, but why in the (historically low unemployment) workplace do you feel people aren’t free to take or leave an employer’s terms, and take their talents elsewhere?

    • I’m not Steve, but since I think he’s right I will answer. Because there never is a comparable employer/position of employment without the provision, but all else equal. We can’t “tease out” the decision-making process of any individual vis-a-vis these clauses, because they are never the only decision point, or even the critical one.

      At some point, especially when you need a job, you just have to take the bad with the good. Not because you “want” a clause where you can’t sue collectively, but because you can live with it, for the paycheck. However, if we can move society forward a little bit (e.g., fewer contracts of adhesion), maybe we’d have to swallow a little less bad, with the good.

    • Wrt, because having been both job applicant and hiring manager at different times, in my experience it’s easier for someone who needs work done to find multiple applicants than it is for someone who needs a paycheck to find multiple job offers. Anecdotal, sure, but my experience has been that employees and job applicants are disposable and replaceable in a way that jobs (and job offers) aren’t. Part of it’s that the unemployment numbers are artificially low because they exclude people who could look for work but aren’t doing it at the moment, and part of it’s that there’s workarounds to make do with vacant positions (and the ever-increasing availability of automation making more and more of the labor pool a useless surplus).

  • I thought Walter’s article was very thoughtful but one this one point — contracts of adhesion — even as a philosophical libertarian, I have to go with Steve. Contracts of adhesion (whether expressed in employment contracts or the more ubiquitous online “Terms and Conditions,” or, say, airlines’ Contracts of Carriage) have no moral basis in autonomy. The imbalance of power (I can’t exactly start my own airline or create my own just in response to contract terms I don’t like) and “take it or leave it” approach would lead me, as a judge, to just line item terms out every time.

    • I admire Walter’s consistency on this, which has extended to related matters such as disapproval of “take your gun to work” laws, but if “pro-liberty” extends to the government creating a scheme by which hundreds millions of people are signing away their constitutional rights in exchange for a job or necessary service, what’s being advanced isn’t libertarianism; it’s modern feudalism.

  • I hope the court will go on to vindicate individual freedom-of-contract by taking away the right of unions under the NLRA to extort political contributions from members who did not voluntarily join them. That’s a major First Amendment violation we have been stuck with since “the switch in time that saved nine.”

    While we’re at it, let’s amend the Constitution to fix the size of the Court so that it will never be possible for any president to pack the court.

  • Honestly, given the ruinous costs of (even successful) litigation on a defendant business, and the expense of re-litigating even similar contract language again and again before the courts, it in no way surprises me that “form” language and form contracts have arisen in an effort to control costs – otherwise, the marginal cost of potential litigation may swallow the productivity of even numerous employees. Same thing in many products we routinely enjoy, software being a fine example. Given the costs to produce, and the low return on most investments in software creation, it may well be that – absent those form contracts – the designer would have no reasonable economic basis to be willing to provide their product for sale.

    The widespread adoption of near identical contracts is a symptom, its not the disease.