A U.S. Supreme Court ruling allowing employers to require workers to sign individual arbitration agreements could sharply reduce class-action lawsuits against healthcare companies claiming violations of federal and state rules on wages, hours, and sexual and racial discrimination.
In a 5-4 decision last week on three consolidated cases, the high court held that companies can include clauses in employment contracts that require employees to resolve disputes through individual arbitration, barring them from banding together to seek relief for common issues. The decision could affect about 25 million employees.
Experts said this could affect the handling of claims that hospitals, home health agencies, nursing homes and other healthcare employers failed to pay employees for off-the-clock work or overtime or that they improperly deducted meal breaks.
They predicted the decision in Epic Systems Corp. v. Lewis would encourage more healthcare employers, including those with unionized workers, to include individual arbitration provisions in labor contracts. But experts disagreed sharply on the merits of such a move.
"Many employers will decide it's time to implement arbitration agreements with class-action waivers," said Michael Kun, an employment law specialist with Epstein Becker & Green in Los Angeles, who represents hospitals and ambulance companies.
"This will have a devastating, chilling effect on healthcare industry workers, particularly low-wage workers who experience these problems constantly," said Fernando Losada, collective bargaining director for National Nurses United. "They won't have the resources individually to fight these cases, and that will lead to further abuses in the industry."
Wage-and-hours lawsuits, made under the federal Fair Labor Standards Act and related state laws, have significantly increased over the past 20 years, employment lawyers say. Hospitals and other healthcare employers have been major targets for plaintiff attorneys, at least partly because their large workforces and relatively well-paid workers have made such litigation lucrative. Some hospitals have faced multimillion-dollar settlements.
In contrast, mandatory arbitration forces nurses and other healthcare workers into proceedings headed by private arbitrators whose incomes are dependent on maintaining good relations with the employer, said Libby Devlin, southern region director for National Nurses United.
In the Epic case, technical writer Jacob Lewis wanted to sue his former employer on behalf of a class of employees who said the technology vendor wrongfully denied them overtime pay. Epic contended its contracts required individual arbitration.
The five more-conservative justices sided with Epic, holding that the Federal Arbitration Act trumped the National Labor Relations Act.
"The virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn, and arbitration would wind up looking like the litigation it was meant to displace" if workers banded together in collective arbitration or litigation, Justice Neil Gorsuch wrote for the majority.
In dissent, Justice Ruth Bader Ginsburg called the majority opinion "egregiously wrong" and said the decision would lead to "huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers."
She added that it's often not financially viable—and it can be dangerous—for workers to bring claims individually. Employers, knowing that workers will be disinclined to bring such cases, will be emboldened to underpay workers and skirt their legal obligations, she warned.
Christine Owens, executive director of the National Employment Law Project, cautioned that forcing workers to arbitrate individual claims could make it harder to hold companies accountable for sexual harassment and discrimination in the workplace because women will have to pursue their claims alone.
One unintended consequence of the ruling for employers, Kun said, is more workers may seek collective bargaining rights since they will have less opportunity to address common workplace grievances via class-action litigation.
Epic founder and CEO Judy Faulkner said she was satisfied with the outcome. "When it comes to grievances regarding wages and hours, we believe individual arbitration agreements strike that reasonable balance," she said in a written statement.
