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As explained in Part 1 of this four-part series, we are exploring some of the more recent state law developments addressing sexual harassment in the workplace. Since the #MeToo movement began over a year ago, there have been various reactions from employees, employers and state legislatures. Employees have reacted by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment. The data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017. In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017. You can find more information on the EEOC’s report here.

Employers have reacted to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  Going forward, employers need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In Part 1 of this series we explored the recent flurry of legislation enacted in the State of California. In Part 2 we look at the recent developments under Delaware law.

DELAWARE

On August 29, 2018, Delaware passed a law that includes mandatory distribution to employees of a state-created information sheet on sexual harassment. Employers with four or more employees in the state of Delaware will be required to distribute the information sheet to new employees at the commencement of employment and all existing employees by July 1, 2019 at the very latest. The sexual harassment information sheet can be found here.

In addition, much like California’s training requirements, Delaware requires employers with at least 50 employees in the state of Delaware to provide interactive sexual harassment training and education. However, unlike California’s training requirements, the new Delaware law requires that both non-supervisory and supervisory employees receive the training.

Employers covered by the new law must provide interactive sexual harassment training to employees that includes the following components:

  • Addresses the illegality of sexual harassment;
  • Defines sexual harassment with the use of examples;
  • Describes the legal remedies and complaint process available to employees;
  • Provides directions to employees on how to contact the Delaware Department of Labor; and
  • Instructs employees that retaliation is prohibited.

The training must be conducted for new employees within one year of the commencement of their employment. Current employees must receive the mandatory training by January 1, 2020.

New supervisors must receive additional interactive training within one year of the commencement of their employment in a supervisory role and existing supervisors must receive training by January 1, 2020. The additional training for supervisors must also include: (1) specific responsibilities of a supervisor regarding the prevention and correction of sexual harassment; and (2) the legal prohibition against retaliation.

For employers who provide – or have already provided – training that meets the requirements of the law prior to January 1, 2019, are not required to conduct additional training until January 1, 2020. After January 1, 2020, both the employee and supervisor training programs must be repeated every two years.

Stay tuned for Part 3 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement. In the meantime, if you or your organization have any questions regarding compliance with state laws in the area of sexual harassment, please contact any member of our Labor and Employment Practice Group.

There have been a variety of responses to the #MeToo movement since it began a little over a year ago. Employees have responded by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment.  Among other things, the data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017.  In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017.  You can find more information on the EEOC’s report here.

Employers have responded to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  This year, employers will need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In this four-part series, we explore some of the more recent state law developments addressing sexual harassment in the workplace.  We will start our exploration with the State of California.

CALIFORNIA

Limitations on Settlements of Sex-Based Harassment and Discrimination Claims

On September 30, 2018, a new law was enacted that prohibits the inclusion of language in settlement agreements that prevent the disclosure of factual information related to:

  • Acts of sexual assault;
  • Acts of sexual harassment as defined under Section 51.9 if the California Civil Code;
  • Acts of workplace harassment and discrimination based on sex;
  • Failure to prevent acts of workplace sexual harassment or sex discrimination; and
  • Retaliation against a person for reporting harassment or discrimination based on sex.

The new law applies to any settlement agreement entered into on or after January 1, 2019 settling a claim filed in a civil or administrative action. If a settlement agreement contains a provision prohibiting disclosure of the information listed above, the provision will be considered void as a matter of law and against public policy.

As a result of this new law, employers with operations in California should consider the impact on potential settlement of sex-based harassment and discrimination claims. The new prohibitions on certain confidentiality provisions of a settlement may create a greater risk for damage to the employer’s reputation even after settling a sex-based claim with an employee or former-employee.

Increased Sexual Harassment Training Requirements

Since 2005, California employers with at least 50 employees have been required to provide two hours of sexual harassment prevention training to all supervisory employees once every two years. On September 30, 2018, legislation was approved that will require California employers with at least five employees to provide sexual harassment training and education to all employees (both supervisory and non-supervisory).  This new law requires employers to provide at least two hours of sexual harassment prevention training and education to all supervisory employees and at least one hour of such training to all non-supervisory employees by January 1, 2020.  Thereafter, the training and education must be provided once every two years.

As a reminder, the sexual harassment training required since 2005, must address all of the following:

  • The definition of sexual harassment under the California Fair Employment and Housing Act and Title VII of the federal Civil Rights Act of 1964;
  • The statutes and case-law prohibiting and preventing sexual harassment;
  • The types of conduct that can be sexual harassment;
  • The remedies available for victims of sexual harassment;
  • Strategies to prevent sexual harassment;
  • Supervisors’ obligation to report harassment;
  • Practical examples of harassment;
  • The limited confidentiality of the complaint process;
  • Resources for victims of sexual harassment, including to whom they should report it;
  • How employers must correct harassing behavior;
  • What to do if a supervisor is personally accused of harassment;
  • The elements of an effective anti-harassment policy and how to use it;
  • “Abusive conduct” under California Government Code section 12950.1, subdivision (g)(2).

This training must be provided in a classroom setting, through interactive E-learning, or through a live webinar. E-learning training must provide instructions on how to contact a trainer who can answer questions within two business days. All training must include questions that assess learning, skill-building activities to assess understanding and application of content, and hypothetical scenarios about harassment with discussion questions.

Additional information on the requirements related to California’s mandatory sexual harassment training can be found here.

Stay tuned for Part 2 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement.

The Occupational Safety and Health Administration (OSHA) has rolled back Obama-era guidance on safety incentive programs and post-accident drug testing. OSHA has a rule prohibiting employer retaliation against employees for reporting work-related injuries or illness. In its latest guidance (a memorandum published October 11, 2018), OSHA clarified that workplace safety incentive programs and post-accident drug testing do not violate that anti-retaliation rule. This differs from OSHA’s approach in previous guidance, where OSHA took the position that, in some circumstances, safety incentive policies and post-accident drug and alcohol testing could be a retaliatory practice for deterring employees from reporting work-related injuries and illnesses. OSHA has changed its course, but the latest guidance is still not a model of clarity.

Specifically, OSHA most recently stated that most incentive programs and instances of workplace drug testing are permissible. However, OSHA warned that such programs can be unlawful and retaliatory if they seek “to penalize an employee for reporting a work-related injury or illness rather than for the legitimate purpose of promoting workplace safety and health.” The new guidance supersedes any other interpretive documents, to the extent they are inconsistent.

Safety Incentive Programs

OSHA clarified and reinforced that incentive programs can be an important tool to promote workplace safety and health. Positive programs, such as those that reward workers for reporting near-misses or hazards or encourage involvement in a safety and health management system, are always permissible, according to the memorandum.

However, the line is less clear regarding rate-based incentive programs (e.g., rewards with a prize/bonus for an injury-free month) and negative action against an employee (e.g., withholding a prize/bonus because of a reported injury). OSHA’s position is that rate-based incentive programs are permissible so long as they are not implemented in a manner that discourages reporting. OSHA claims it would not cite the employer if the employer has implemented “adequate precautions” to ensure that employees feel that they are free to report an injury or illness. The question becomes whether the employer has “adequate precautions” to counterbalance any inadvertent deterrent effect under a rate-based incentive program.

Workplace Drug Testing

OSHA has provided more definitive guidance for drug testing. The following will be deemed permissible:

  • Random drug testing.
  • Drug testing unrelated to the reporting of a work-related injury or illness.
  • Drug testing under a state workers’ compensation law.
  • Drug testing under other federal law, such as a U.S. Department of Transportation rule.
  • Drug testing to evaluate the root cause of a workplace incident that harmed or could have harmed employees.

OSHA has clarified that if an employer chooses to use drug testing to investigate an incident, the employer should test all employees whose conduct could have contributed to the incident, not just the employee(s) who reported injuries.

The attorneys of the McNees Labor & Employment Group are ready to assist your Company with developing OSHA-compliant safety incentives and drug testing policies.

In March 2016, OSHA published its standards for respirable crystalline silica in general industry/maritime (29 C.F.R. § 1910.1053) and in construction (§ 1926.1153), both of which have been phased in.  OSHA has been enforcing the construction standard for about a year (since September 23, 2017), and this summer the standard for general industry/maritime became enforceable (as of June 23, 2018).  Employees in general industry can be exposed to small silica particles during manufacturing (e.g., glass, pottery, ceramics, brick, concrete, and artificial stone) and during other non-construction activities that use sand (e.g., abrasive blasting and foundry operations).   Employers who are involved in such activities, or in construction work, may be affected by the silica standards.

Consequences of noncompliance are serious for employers, not only in terms of potential health risks to their employees, but also risks of enforcement actions by OSHA (and states with OSHA-approved programs).  OSHA has been conservative and generally modest in penalties issued to date, but that is likely to change.  For example, in August 2018, a construction company was cited for violations of the silica construction standard, with a proposed penalty of over $300,000.  Employers in construction and, now, general industry, should heed this warning as a sign of things to come.

Although the two silica standards differ in certain respects, both generally require employers to develop a written exposure control plan, perform an exposure assessment and periodic monitoring, implement feasible engineering and work practice controls, ensure respiratory protection and medical surveillance where necessary, comply with housekeeping measures, and maintain recordkeeping.  The general industry standard also requires demarcation of regulated areas.  It is important that silica hazards are incorporated into an employer’s hazard communication program, as the OSHA Hazard Communication Standard is also incorporated by reference and expanded upon in the silica standards.

Both standards are now subject to enforcement, except for some general industry/maritime requirements for employees exposed at or above the action level, and some requirements for hydraulic fracturing operations in the oil and gas industry.  For enforcement of the general industry/maritime standard, OSHA gave employers an additional 30-day grace period (until July 23, 2018), as long as they were making good-faith efforts to comply.  But the time has come for compliance, inspections, and enforcement.

Employers should be prepared accordingly, consider how to handle an inspection, and consult OSHA’s guidance.  OSHA recently issued various compliance materials on its general industry/maritime webpage, including interim enforcement guidance.  Additional resources  added by OSHA to its construction work webpage include a slide presentation for training construction workers, a five-minute video on protecting workers, a series of short videos for various construction tasks, and an FAQ page.

Even with these compliance materials, the silica standards can be complex and difficult to implement in a practical manner.  Employers should consult professionals to ensure compliance and mitigate any enforcement actions that may arise.

Perhaps the most significant EEO issue percolating through the federal court system right now is whether Title VII’s prohibition against sex discrimination encompasses discrimination on the basis of sexual orientation and gender identity.  There is now disagreement among federal appellate courts on this issue and the U.S. Supreme Court will likely decide the question at some point.  In the interim, the Equal Employment Opportunity Commission has taken the position that Title VII does prohibit discrimination on the basis of sexual orientation and gender identity.  In addition, several federal courts sitting in Pennsylvania have agreed with the EEOC’s position. See EEOC v. Scott Medical Center (W.D.Pa. 2016).

Amidst all the recent focus on how federal courts are interpreting Title VII, little attention has been paid to whether the Pennsylvania Human Relations Act (PHRA) extends protection to the LGBTQ community.  In guidance issued on August 2, 2018, the Pennsylvania Human Relations Commission (PHRC) made its position on the issue clear.  The PHRC’s “Guidance on Discrimination  on the Basis of Sex Under the Pennsylvania Human Relations Act” states that the “prohibitions contained in the PHRA and related case law against discrimination on the basis of sex…prohibit discrimination on the basis of sex assigned at birth, sexual orientation, transgender identity, gender transition, gender identity, and gender expression.”  The Guidance further states that the Commission will accept sex discrimination complaints based on this expanded definition of the term.  The PHRC does not address some of the more thorny related questions, such as whether employer health plans must cover gender transition surgery as a matter of state law.

Notably, the PHRC Guidance further states that respondents (e.g. employers) who believe the PHRA violates their free exercise of religion “are free to avail themselves of the protections found within the Religious Freedom Protection Act (RFPA).”  The Guidance outlines how a respondent should go about raising an objection under the RFPA.  Some may remember that the RFPA was the statutory basis for the Supreme Court to limit the scope of the Affordable Care Act’s “contraception mandate.”

In light of the PHRC’s recent guidance, employers should carefully consider whether it’s time to revise their policies governing harassment and equal employment opportunity.  In addition, it may be advisable to revamp harassment prevention training programs to specifically address LGBTQ concerns.  If you have any questions regarding the PHRC’s Guidance, please don’t hesitate to contact any member of our Labor and Employment Practice Group.

Two years ago, when the Pennsylvania Medical Marijuana Act (MMA) passed, we advised employers that the Act contained an express anti-discrimination provision providing that:

No employer may discharge, threaten, refuse to hire or otherwise discriminate or retaliate against any employee regarding an employee’s compensation, terms, conditions, location or privileges solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.  MMA §2103(b)(1).

Since that time, however, there has been little guidance to employers regarding the breadth or impact of this anti-discrimination provision.  This month, that changed.

On September 5th, a Federal District Court in Connecticut ruled on the impact of such an anti-discrimination provision in the hiring context.  Noffsinger v. SSC Niantic Operating Co., LLC. Because the Connecticut Palliative Use of Marijuana Act (PUMA) includes the same anti-discrimination as the PA Act, the Noffsinger decision provides guidance to Pennsylvania employers.

In Noffsinger, the employer, a health and rehabilitation facility, offered plaintiff the position of Activities Manager subject to completion of various pre-employment screenings, including a drug screen.  At that point, plaintiff advised the hiring manager that she was qualified under PUMA to use medical marijuana to treat PTSD.  Plaintiff showed the manager an empty pill container specifying the dosage information for her medical marijuana pills and stated she took the pills each evening to prevent night terrors.  Employer sent plaintiff for the drug screen, which returned positive for THC.  The hiring manager discussed the situation with HR and advised that plaintiff was disqualified from the job because “medical marijuana is not an approved prescription” and “we use federal law, which indicates marijuana is still illegal.”  Employer subsequently rescinded plaintiff’s job offer.

The plaintiff filed suit alleging, among other things, that the employer discriminated against her in violation of PUMA’s anti-discrimination provision.  The relevant portion of PUMA provides “No employer may refuse to hire a person or may discharge, penalize or threaten an employee solely on the basis of such person’s or employee’s status as a qualifying patient.”  Discovery revealed that “plaintiff’s job offer was rescinded because of her positive drug test result and that this positive drug test result stemmed from plaintiff’s use of medical marijuana pursuant to her qualifying status under PUMA.”  Accordingly, the District Court granted summary judgment in plaintiff’s favor, unequivocally stating that the employer’s refusal to hire her violated PUMA’s anti-discrimination provision and that the statute contained an implied private right of action.  Notably, the District Court rejected the employer’s arguments that federal law pre-empted PUMA and that the federal Drug Free Workplace Act barred it from hiring plaintiff.

They key take-aways from the Noffsinger case are as follows:

  • The anti-discrimination provision contained in Connecticut’s PUMA provides an implied right of action;
  • A zero-tolerance pre-employment drug testing policy violates the anti-discrimination provision in the Connecticut law;
  • The Drug Free Workplace Act will not save a zero-tolerance policy, because the DFWA only requires federal contractors to “make a good faith effort to maintain a drug-free workplace.” The DFWA does not require drug testing and does not prohibit federal contractors from employing someone who uses medical marijuana outside the workplace in accordance with a program approved by state law.
  • The anti-discrimination provision contained in PUMA mirrors the anti-discrimination provision contained in the PA Medical Marijuana Act.

Based on the Noffsinger decision and the similarities between the PUMA and the PA MMA, PA employers should take caution.  Refusing to hire an applicant, who is a certified to use medical marijuana under PA law, simply because he/she has failed or will fail a drug screen likely violates the anti-discrimination provision of the PA MMA.  Instead, we recommend that employers engage in an interactive process with the employee to determine if his/her use of medical marijuana, outside of work, can be accommodated (i.e. whether the employee’s use of medical marijuana will affect the employee’s ability to perform work in a safe and productive manner).  We also recommend including exception language in your pre-employment drug testing policy.

We are glad to help you work through the interactive process, to assist with the review and revision of your policies or to otherwise discuss with you the impact of the PA MMA on your workplace.

In a recent case, decided on June 19, the Supreme Court of Pennsylvania granted appeal to clarify the scope of subrogation reimbursement under the Pennsylvania Workers Compensation Act (the “Act”).

By way of background, the Act makes an employer liable for paying disability benefits and medical expenses of an employee who sustains an injury in the course of his/her employment, regardless of whether the employer was negligent. Under Section 319 of the Act, however, employers are entitled to reimbursement for certain expenses where a third party caused the employee’s injury. Specifically, an employer (or its insurance carrier) has the absolute right to collect the workers’ compensation benefits it paid if the employee recovers from the third party who caused the injury. This is known as subrogation.

The Supreme Court in its recent decision addressed the scope of the reimbursement under Section 319 of the Act. Section 319 states, in pertinent part:

Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right the employe…against such third to party to the extent of the compensation payable under this article by the employer; reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe…Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe…and shall be treated as an advance payment by the employer on account of any future instalments of compensation.

The critical question the Court addressed was whether the term “future instalments of compensation” encompasses both future disability benefits and payment of future medical expenses. In other words, the Court addressed whether an employer can credit the excess third part recovery against both future disability and future medical payments.

The Commonwealth Court, our intermediate appellate court, concluded that the term “instalments of compensation” encompasses both disability and medical expenses. The Commonwealth Court reasoned that since the objective of subrogation is to protect the presumably innocent employer from ultimate liability, the credit should apply to both medical expenses and disability benefits.

In its June 19th ruling, the Supreme Court disagreed. The Court’s assessment of the issue was in some ways quite straightforward, but it requires an understanding of how an employer must pay disability and medical expenses. The long and short of it is that disability benefits are required to be paid in installments, while medical expenses are not. Accordingly, the Court found that the term “instalments of compensation” under Section 319 spoke for itself and meant “compensation that is paid in installments” which can only include disability benefits, not medical expenses.

In a nutshell, the Court found that when a workers’ compensation claimant recovers proceeds from a third-party settlement under Section 319, the employer (or the insurance carrier) is limited to drawing down against that recovery only to the extent that future disability benefits are payable to the claimant.

What does this mean in plain language?

If the third-party recovery exceeds the employer’s accrued subrogation lien (workers’ compensation payments made prior to resolution of the third-party claim), the employer can treat the excess recovery (which will be paid to the employee) as a credit against future workers’ compensation payments. However, the credit may only be taken against future disability (aka wage loss or indemnity) benefits. There may be no credit taken against future medical benefits.

For this reason, employers looking to settle with an employee who has sustained a serious work injury that was caused by the negligence of a third party should proceed with caution! This is especially true when only the wage loss portion of the claim is resolved in the settlement and the medical portion is left open (either indefinitely or for some set time in the future). When resolving a claim in this way, employers must remember that no excess recovery credit can be taken against future medical benefits. This new reality should be factored into the valuation of the case.

If you need any assistance with subrogation rights or have any questions regarding this Article, please feel free to reach out to any member of our Labor and Employment group for assistance.

On June 6, 2018, Governor Wolf signed Executive Order 2018-18-03, which is designed to combat the gender pay gap in Pennsylvania. The Executive Order directs all state agencies under the governor’s jurisdiction to:

  • no longer inquire about a job applicant’s current compensation or compensation history at any stage during the hiring process;
  • base salaries on job responsibilities, position pay range, and the applicant’s knowledge, skills, competencies, experience, compensation requests, or other bona fide factor other than sex, except where compensation is based on:
      • a collective bargaining agreement;
      • a seniority system;
      • a system of merit pay increases;
      • a system which measures earnings by quantity or quality of production, sales goals, and incentives
  • clearly identify the appropriate pay range on job postings.

The Executive Order does expressly state that applicants are not prohibited from volunteering information about their current compensation level or salary history in negotiating a salary. However, no agency can request that an applicant disclose current salary or salary history information.

So why the need for the Executive Order? Some argue that by asking an applicant to reveal their current salary or salary history, employers are perpetuating pay inequality between men and women. The reasoning is that because women have been paid less than men historically, asking applicants their salary history and then basing salary determinations on prior pay information further continues the cycle of pay inequality.

While the Executive Order is only applicable to Commonwealth agencies under the Governor’s jurisdiction, it may signal a push to address the gender pay gap throughout Pennsylvania.

Please feel free to contact any member of the McNees Wallace & Nurick Labor and Employment Practice if you have any questions regarding this article.

If you have followed our blog over the past year, you are aware of the long and tortured history of the National Labor Relations Board’s joint employer standard.  The recent history starts with the Obama Board’s decision to overturn decades of case law.  But the saga continued.

Just last month, we reported on the Trump Board’s proposal to promulgate regulations adopting a joint employer standard.  According to the Board, issuing regulations will clear up the uncertainty currently surrounding the standard that was created by years of case law.  Those who have been following this matter might view the Board’s proposed rulemaking as a welcome opportunity for clarity on an issue that has vexed employers and unions alike in recent years.

But not everyone was pleased by the Board’s announcement.  In a joint letter to Trump-appointed Board Chairman John Ring, United States Senators Elizabeth Warren, Kirsten Gillibrand, and Bernie Sanders questioned the Board’s ability to remain independent on the issue given its overturned decision in Hy-Brand (in February 2018, the Board reversed its own ruling after its Ethics Officials determined that one of the Board Members should have been disqualified from participating in the case due to a conflict of interest).  Essentially, Senators Warren, Gillibrand, and Sanders accused the Board of using rulemaking to reinstate the Hy-Brand decision.  In other words, they believe that the Board has already decided on the final rule to be issued based on personal bias and without regard for the notice-and-comment process.  Serious allegations, to be sure.

Earlier this week, Chairman Ring responded to the Senators with a letter of his own.  The Chairman explained, in no uncertain terms, that a majority of the Board will engage in rulemaking on the joint employer issue and that it intends to issue a notice of proposed rulemaking sometime this summer.  He reminded the Senators that all Board Members, both past and present, have personal opinions formed by years of experience.  After assuring the Senators that the Board has not pre-determined the final joint employer rule, Chairman Ring also pointed out that the courts have held that personal opinions do not render Members incapable of engaging in rulemaking unless it can be shown that their mind is “unalterably closed” on the issue.

If we’ve learned anything from this dust-up between the Senators and the Board, it’s that the Board will proceed with rulemaking on the joint employer standard, and that accusations of bias from U.S. Senators will not stop it from doing so.  As we said last time – stay tuned.  More news is coming, and soon.

The Supreme Court of the United States held today that arbitration agreements, which waive the right to proceed as part of a class or collective action, are enforceable in the employment context. In Epic Systems Corp. v. Lewis, the Court held that employment agreements that call for individualized arbitration proceedings to resolve workplace disputes between employers and employees are lawful. Interestingly, the Court’s 5-4 decision was authored by the newest Justice, Justice Gorsuch.

In a series of cases, employees and former employees had asserted that agreements requiring individual arbitration violate the National Labor Relations Act, because the NLRA protects employee rights to proceed in class or collective actions. Although it had previously taken a different position, in 2012, the National Labor Relations Board agreed that arbitration agreements, which waive the right to proceed in class or collective actions, violate the NLRA. The Board’s controversial position was set forth in D.R. Horton and Murphy Oil USA.

Employers countered that the Federal Arbitration Act expresses a strong preference for arbitration and makes clear that arbitration agreements are presumptively valid. The FAA requires that courts enforce arbitration agreements, including procedural terms related to the arbitration process itself. The FAA does provide that arbitration agreements will not be enforced if there is a legal basis to set aside the agreement, such as fraud or duress in the making of the contract. However, in this case, the only argument presented was that the individual arbitration agreements violate the NLRA.

The Supreme Court rejected that contention. Ultimately, a slim majority of the Supreme Court agreed with the employers and held that the FAA requires enforcement of arbitration agreements, including agreements that call for individual proceedings, because such agreements do not violate NLRA. The Court noted that in order for a law such as the NLRA to trump the FAA, there must be a clear statement of intention in the law. The Court found no such clear intention in the NLRA.

The Supreme Court’s decision is the law of the land, and that means that arbitration agreements in the employment context that require individualized claims are lawful. Employers looking to update their employment agreements in light of this decision can reach out to any member of the McNees Labor and Employment Group. In addition, if you are thinking about implementing arbitration requirements for the first time, we can help.