In Epic Systems v. Lewis, the Supreme Court recently paved the way for employers to include collective and class-action waivers in arbitration agreements. However, arbitration agreements are not necessarily a panacea and for those employers for whom they do make sense, they need to be carefully drafted and implemented. This session explores the answers to questions such as: - What does this decision mean for employees and employers? - What attacks on arbitration agreements remain post-Epic? - Should employers embrace arbitration agreements (and when)? - How should an employer roll out an arbitration agreement?

1. Epic Victory: Arbitration Agreements
in the Workplace
Epic Systems v. Lewis as a Case Study
October 18, 2018

2. Presenter
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Sean Scullen
National Labor & Employment Group Chair and
Co-Chair of Class Action Subgroup
sean.scullen@quarles.com
(414) 277-5421

3. Agenda
•The Issue: Enforceability of Arbitration Agreements
•The Supreme Court's Ruling in Epic
•Post Decision Issues
•Future Legislation and Litigation
•Pros & Cons for Employers
•Plaintiff's Bar's Response to Epic
•Implementing Arbitration Agreements
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4. The Issue
Whether class action waivers in employment arbitration
agreements are enforceable in light of the National Labor
Relations Act (NLRA) and the Federal Arbitration Act (FAA)
• Employees argued
• Class actions are concerted activity protected by NLRA
• Employers argued
• The NLRA does not guarantee right to class actions and does not trump the FAA
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5. Legal Background
Three consolidated cases presenting same question:
• Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016)
• Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016)
• Murphy Oil USA, Inc. v. NLRB, 808 F.3d 661 (5th Cir. 2015)
• In Epic and Morris, employees brought class and collective actions alleging employer failed to pay
overtime compensation by misclassifying them as exempt employees under both state and federal wage
laws. The employers in both actions moved to compel arbitration and the district courts denied the
motions.
• Murphy Oil was an appeal of a NLRB decision that Murphy Oil unlawfully required employees to sign
arbitration agreements that contained class action waivers that violated the NLRA. The Seventh and
Ninth Circuits held class waivers impermissible while the Fifth held them permissible, creating a circuit
split ripe for Supreme Court review.
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6. The Supreme Court Ruling
Resolving the circuit split, the Supreme Court upheld the
enforceability of arbitration agreements providing for individual
arbitration of claims that could otherwise be brought as a class or
collective action in an opinion written by Justice Gorsuch.
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7. The Majority Position
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• The FAA requires arbitration agreements be
enforced based on their terms, including terms to
arbitration individually
• The FAA’s savings clause invalidates clauses subject
to general contractual defenses
• The FAA’s savings clause does not give refuge to
defenses that attack only arbitration agreements
• The NLRA did not displace the FAA
• Section 7 of the NLRA focuses on the right to
organize unions and bargain collectively; it does
not protect collective action in legal forum and did
not displace the FAAJustice Gorsuch

8. The Dissent
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• The majority is “egregiously wrong”
• NLRA policy is that there is strength in
numbers
• Plaintiffs are not asking for access to a judicial
forum, but rather to be allowed to pursue
their work-related claims collectively
• Section 7 protects the option to engage in
collective litigation, waiver of which is illegal
• Illegality is a generally applicable contract
defense that fits within the savings clause
Justice Ginsberg

9. After Epic Decision, Issues Remain...
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Contractual defenses remain as potential attacks on
enforceability of arbitration agreements.
• A court will compel parties to arbitration "if 3 elements are present:
1. an enforceable written agreement to arbitrate,
2. a dispute within the scope of the arbitration agreement,
and
3. a refusal to arbitrate."

10. Remaining Attacks on Arbitration:
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Cost shifting to the employee
• Courts are not likely to enforce arbitration provisions that shift the cost of
arbitration on the employee because unreasonable fees prevent
employees from seeking to vindicate their statutory rights.
• AAA and JAMS prohibit employers from shifting the cost of arbitration to
the employees by rule.
• AAA – The portion of an arbitration the employee can be required to pay is
$300; the employer must pay the remaining $1,650 in filing fees, plus the
arbitrator’s hourly costs
• JAMS – The employee can only be required to pay the case management fee
of $400; the employer must deposit $5,000 to be billed against the
administrative costs

11. Remaining Attacks on Arbitration:
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•Who are the parties to the agreement?
•Failure of consideration
•Shortening the statute of limitations
•Choice of law or forum clauses

12. Future Litigation and Legislation
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• Lamps Plus, Inc. v. Varela (Supreme Court)
• arbitration agreements silent on class treatment
• Jock v. Sterling (2nd Circuit)
• arbitrator’s authority to bind absent class members
• Legislative efforts
• New York and South Carolina legislation
• The Arbitration Fairness Act
• The Ending Forced Arbitration of Sexual Harassment
Act

13. Pros and Cons of Arbitration From an Employer’s Perspective
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Pros
• No jury
• Confidential
• Expediency
• Select arbitrator
• Avoid class wage claims
• May deter some claims
Cons
• Expensive
• Lack of appealability
• Mixed results on same claim
• Inability to obtain finality
• Summary judgment may not
be available

14. Mass Individual Arbitration –
Plaintiff’s Bar’s Response to Epic
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• Class actions allow employees to efficiently vindicate their
rights by pooling resources
• Courts benefit by deciding common issues of law and fact
arising from common facts
• Employers benefit from avoiding numerous individual suits,
repetitive discovery, and obtaining finality
• In meritorious wage and hour litigation, class-wide
resolution can be the most cost effective and efficient
resolution possible for employers, employees, and the
courts

15. Mass Individual Arbitration – Plaintiff’s Bar’s Response to Epic
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$ 24,750
$120,000
$ 3,500
$548,250
Filing fees - for 15 claims
Arbitrator time – for 15 hearings
Defense counsel time – for 15 hearings
Plaintiff’s counsel time – for 7 hearings
Plaintiff’s damages – for 7 hearings
$250,000
$150,000
Hypothetical – 950 member class, average $500 claim,
Total exposure is $475,000

16. Implementing Arbitration Agreements
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• Practical considerations related to consideration
(and morale)
• Easier to have employees sign at the time of hire
• May need to consider tying to raises or bonuses

17. Implementing Arbitration Agreements
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• Electronic signatures
• Employees have recently challenged authentication
of their electronic signatures
• Employers need to ensure valid IT process for ensuring employee
identity (securing precautions and electronic signature requirements
that are unique)
• Ensuring that non-English speaking workers are
provided information in native language

18. © 2018 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained
herein is intended as legal advice or opinion relative to specific matters, facts, situations or issues. Additional facts and
information or future developments may affect the subjects addressed in this document. You should consult with a lawyer about
your particular circumstances before acting on any of this information because it may not be applicable to you or your situation.
QUESTIONS?
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19. Thank you
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Sean Scullen
National Labor & Employment Group Chair and
Co-Chair of Class Action Subgroup
sean.scullen@quarles.com
(414) 277-5421