00:00 [Archival]: We'll hear argument first this term in case 16-285, Epic Systems Corporation versus Lewis and the consolidated cases.
00:08 Leon: Hey, everyone, this is Leon Neyfakh from Fiasco and Slow Burn. On today's episode of 5-4, Peter, Rhiannon and Michael are talking about Epic Systems v. Lewis, a case about employment law and what happens when employees are forced to sign contracts in which they give away their rights.
00:27 [Archival]: If you are elected, would you support a bill seeking to end forced arbitration of all employment disputes in the workplace?
00:36 [Archival]: Well, yes, but it's...
00:37 Leon: This is 5-4, a podcast about how much the Supreme Court sucks.
00:55 Peter: Welcome to 5-4, where we dissect and analyze the Supreme Court cases that have leached America's nutrients like a tapeworm from its unsuspecting host. [chuckle] I am Peter, Twitter's The_Law_Boy, I'm here with Michael.
01:12 Michael: Hey, everybody.
01:12 Peter: And Rhiannon.
01:13 Rhiannon: Hi, I'm alive.
01:15 Peter: Yeah.
01:15 Michael: That's right.
01:16 Peter: That's right.
01:17 Michael: COVID survivor.
01:18 Peter: When we recorded last, Rhiannon's survival was 40%, tops.
01:26 Peter: And here we are...
01:26 Rhiannon: I was cooking in this closet.
01:29 Peter: Another miracle.
01:30 Rhiannon: That's right.
01:31 Michael: More proof.
01:32 Rhiannon: Thank you, God.
01:33 Michael: The liberals need to get over it and we need to just open it all up. It's nothing more than the flu.
01:39 Rhiannon: No, no, no, no. Don't let them mansplain COVID to you.
01:43 Peter: Today's case is Epic Systems v. Lewis. This is a case about whether employers can require employees to waive their right to class action lawsuits. So a couple of decades ago, a lot of employers started requiring their employees to sign arbitration agreements. Those agreements stated that employees could not sue their employer in court, instead they had to take any disputes to arbitration. It's a big advantage for employers. Not only is arbitration less expensive than traditional litigation, but employers are considerably more likely to win in arbitration, and when employees win, they are generally awarded lower damages.
02:21 Peter: So not long after these agreements became popular, employers started putting in what are called class action waivers, stating that not only do you have to arbitrate your claims outside of court, but you cannot take part in a class action lawsuit against the company. So these arbitration agreements are doing two things: One is they are keeping you out of court and forcing you to resolve any disputes in front of an arbitrator with your employer; and two, they are forcing you to waive your rights to participate in a class action, whether that be in court or in front of an arbitrator, so that you have to pursue your claim individually.
03:00 Peter: These are often included in your employment agreement when you first start working. Sometimes employers roll them out later and send out an email saying, "If you don't respond, we're gonna assume that you have acknowledged and accepted this." So as a result, these class action waivers effectively prevent workers from vindicating their rights at all and allow employers to get away with smaller scale wage theft without repercussion. The legal issue in this case, we'll get to in a bit, but it's about two laws, the National Labor Relations Act and the Federal Arbitration Act. But what this case is really about is how conservatives on the Court have selectively weaponized the idea of workers' choice to use it against the workers themselves and to the benefit of massive corporations.
03:43 Rhiannon: Yes. Is this the first case we're covering where a majority is written by Justice Gorsuch?
03:49 Peter: If you don't count Bostock County...
03:51 Rhiannon: Oh, oh, yeah.
03:53 Peter: The Title VII case, the win.
03:54 Michael: The good one.
03:56 Peter: But this is the first case we are very critically covering by our boy, Neil Gorsuch, who's just turned 23 today, I believe.
04:06 Peter: Happy birthday, Neil.
04:06 Rhiannon: Yeah, he is a little baby angel on the Supreme Court, isn't he?
04:11 Peter: This is a 5-4 case. This is right before Kennedy retires and Kavanaugh takes his place on the Court. One of the first major Gorsuch decisions. Gorsuch, in my view, a very tedious writer.
04:22 Michael: Absolutely.
04:24 Peter: Obviously, he's trying to imitate Antonin Scalia.
04:28 Rhiannon: Yep.
04:28 Michael: Yes.
04:28 Rhiannon: He wants to be cute.
04:28 Peter: He tries to do these logical gotchas all the time, and he's not good at it. It's very unsettling to read.
04:34 Rhiannon: Right.
04:35 Michael: And he tries to get that quippy clever writing, but it comes off as just like doltish.
04:42 Rhiannon: It's like a knock-knock joke. You're just like, "Oh, really, you got me." [laughter] I also really respect that... Peter, thank you so much for continuing to say his name wrong. Never fixing that.
04:54 Peter: I don't believe that it is wrong.
04:55 Michael: It's a real conundrum.
04:55 Peter: I've never heard him say it.
04:56 Rhiannon: He said it in his confirmation hearing.
04:58 Peter: I didn't watch that. I'm not out here...
05:00 Rhiannon: Like I said, I respect it. You're good.
05:02 Peter: A long time ago, someone told me that I'm saying Gorsuch wrong. And I was like, "You know what? That just doesn't matter to me. I'm gonna keep going."
05:10 Rhiannon: Right. Yeah, who cares?
05:13 Peter: One other thing I want to say about this case. This is the first case where I have something that looks loosely like an expertise. I've practiced some employment law litigation in my day. So anything...
05:23 Rhiannon: Oh, is that right? On whose side? Oh, we're just going past that.
05:27 Peter: Whoever paid me the most, Rhi. [laughter] I just want to note that any time in the past 21 episodes that you heard something that sounded like expertise, that's not what that was, I was faking that, but this time it's real. So Rhi, walk us through some background here.
05:46 Rhiannon: Okay. Yes. What's up, haters? You thought that I was gonna die? I'm not.
05:51 Michael: Congrats.
05:52 Rhiannon: I'm gonna die from other reasons. [chuckle] One day. Before we get into the specific facts of this case, it makes sense, I think, to talk about the history of how these laws that are at issue in Epic Systems get passed and why we have them. So the early 1900s were an absolutely wild time for capitalism in the United States. So you technically couldn't have slaves anymore, but industry was like, "Okay, okay, okay, okay, I'll call you an employee rather than my property, but I will not recognize that you have any rights." And the Supreme Court during that time is 100% cool with it. In fact, they completely make up a fake right to support bosses and this kind of laissez-faire economic philosophy. And over the course of a few decades, from the late 1890s into the 1930s, the Supreme Court hands down several cases defending the so-called freedom of contract.
06:53 Michael: Is there anything that happened in the 1930s?
06:55 Rhiannon: You know what, Michael, we're gonna get to that.
06:57 Michael: Okay, sorry.
06:58 Rhiannon: But right now, it's all about the bosses and their freedom of contract.
07:02 Michael: Right.
07:02 Rhiannon: So the Supreme Court is saying that economic liberty and the right of parties to enter into private contracts, that's like a substantive right protected by the Fourteenth Amendment of the Constitution.
07:14 Michael: So insane.
07:16 Rhiannon: Yeah, and this period in the Court's history is referred to as the Lochner era. It's named after a case that's called Lochner that happened kind of at the beginning of this time.
07:25 Michael: And as a reminder to our listeners, the Fourteenth Amendment was one of those Civil War Amendments that was like, "Hey, freed slaves, they have equal rights." And the Court is like, "Yeah, free slaves have equal rights to enter into a contract for indentured servitude." That's the Constitution talking.
07:43 Rhiannon: Right, right.
07:43 Peter: This is such like an American mind disease thing.
07:46 Rhiannon: Yes.
07:47 Peter: Right? Where it's just like, somehow the American mind took like the independence of the frontier spirit and turned it into this thing where they're like, "Yeah, child labor. You should be able to do that too because of freedom." Taking an amendment that is meant to empower freed slaves and turning it into something that is a weapon for industry, some of the most American shit of all time.
08:08 Michael: That's right.
08:08 Rhiannon: Yeah, just fucking classic. So during this era of economic and constitutional interpretation, of course what happens is working conditions and terms of employment are violent and menacing and employers are being protected anyways. So children can be forced to work. You can be forced to work seven days a week with no minimum wage. You can be fired for organizing into a union. And the Supreme Court says, "That's good, 'cause actually, that's freedom." And importantly, observers at the time note that when employers can prohibit employees from collective bargaining, the laboring man is left "absolutely helpless" because it is requiring that he present any grievance he has with the employer in a completely individual and therefore powerless capacity. That's important for the case that we're gonna talk about.
09:02 Rhiannon: Things finally got better in the 1930s, which is when Congress finally passed legislation to protect workers' rights. The NLRA, the National Labor Relations Act, and other similar legislation is passed by Congress over the course of the early 1930s. The country had just gone through the Great Depression, of course. And the point of passing these laws is to say, "Hmm, actually, this maybe isn't the way we want the economy to run." And so, it's taking literal acts of Congress, but what Congress is finally saying in response to the Supreme Court acting crazy like this, is that workers should be allowed to take collective action because the power imbalance between employee and employer is obvious and workers should be protected.
09:45 Michael: I'm glad that we have learned the lessons of history and have realized that just unfettered capitalism without any workers' rights can only lead to ruin.
09:58 Rhiannon: Yup, we're good now.
09:58 Michael: Yeah.
09:58 Rhiannon: The NLRA guarantees employees the right to self-organization, to form labor organizations and to engage in other concerted activities for those purposes. And additionally, it prohibits employers from interfering with, restraining or coercing employees in the exercise of those rights, those rights to association and organization. To enforce the provisions of the NLRA, the statute also created the NLRB, the National Labor Relations Board, to administer labor policy for the nation. And just a historical note about how the Supreme Court responded to the NLRA, after the NLRA is passed, a couple of cases come up to the Supreme Court challenging the new labor protective laws. And this time, the Court upholds the protections. So the Lochner era is said to have ended then, and the substantive right to contract is said to be a product of a totally bygone era, supposedly.
10:55 Michael: I think it's worth noting that like this switch in the Supreme Court's ideology is largely credited to threats from FDR of packing the Court, of like, "If you don't bless this new administrative state that we're creating, I'm just gonna expand the size of the Court to 15 or whatever. I'm gonna put in a bunch of Justices who agree with me. Your opinions won't matter anymore." And so the Court was like, "Okay, we're just gonna say it."
11:24 Rhiannon: Okay, I agree with you now, really good point. Turning now to the facts of this case, Epic Systems, which you may be surprised to hear, did not happen in the early 1900s, but actually in the year of the Prophet Muhammad, peace be upon him, 2018.
11:40 Peter: Hold on. Is that how you refer to the year of the prophet? So you just use the regular calendar?
11:45 Rhiannon: I'm just doing a play on the year of our Lord.
11:47 Peter: Well, that's because that's the year of our Lord.
11:49 Rhiannon: Oh, my God.
11:49 Peter: It dates to Jesus Christ.
11:53 Rhiannon: Okay, so actually this case did not happen in the early 1900s, but actually in the year 2018.
12:01 Peter: Okay, before you get into the details here, I want to contextualize this a little bit. You have the National Labor Relations Act passed in the 1930s, and it bolsters the ability of workers to unionize, to otherwise organize, and that continues for several decades where union activity is high. And in the '70s, it starts to fade for various reasons, like workers generally sort of lose their power. And a part of this is some legal strategies employed by management, one of which is leaning on the Federal Arbitration Act. The Federal Arbitration Act is a law that basically just says that arbitration agreements need to be enforced according to their terms. And what the companies started saying was that, "What this means is that if we enter into an arbitration agreement with our workers, those arbitration agreements can't be infringed by the courts, by Congress, by whomever."
13:02 Peter: And the result of it is that these large companies utilize arbitration agreements to sort of impose their will upon workers. They start to build in these clauses that you can no longer bring class action lawsuits against your employers. And as a result, we are sort of seeing the return of the same type of argument that dominated in the Lochner era, where the contract rights are being held above the rights of labor to collectively organize.
13:32 Rhiannon: Exactly. Epic Systems is actually a consolidation of three separate cases that came up through their federal court system at about the same time, and they sort of presented generally the same issues about whether the NLRA trumps the Federal Arbitration Act.
13:49 Rhiannon: In the named case, Epic Systems versus Lewis, employee Jacob Lewis sued his employer, a software company called Epic Systems, after he signed a new employee policy that required individual arbitration in any employment disputes. And even though he signed the new policy, Lewis and other technical writers at Epic Systems said that the company was violating the Fair Labor Standards Act by not properly paying them overtime wages. So they filed a class action lawsuit, and the company in response is saying, "No, court, we want the employees' arbitration agreements to be enforced and you should dismiss the case because the employees signed a contract saying they wouldn't file class action lawsuits."
14:34 Rhiannon: The second of the three consolidated cases involves the huge international accounting firm, Ernst and Young. Two employees of Ernst and Young filed a class action on behalf of all Ernst and Young employees in California, alleging that they also were not being properly paid overtime wages. In that case, Ernst and Young responds the same way. These employees, they say, signed contracts, saying they would not enter class action suits, and they would instead individually arbitrate these kinds of claims. And in the third case, a gas station employee named Sheila Hobson sued the oil company, Murphy Oil, saying that she shouldn't be forced to arbitrate her claims if she had Fair Labor Standards complaints as well. She wanted to go to court rather than arbitrate.
15:21 Peter: So the legal question here is, how do these two laws work together, the National Labor Relations Act and the Federal Arbitration Act. The Federal Arbitration Act says that arbitration agreements must be enforced according to their terms. In this case, workers have signed away their right to class action and arbitration. But the National Labor Relations Act, the NLRA, guarantees employees the right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection."
15:53 Rhiannon: Yeah, also, it might be referred to as collective action or collective bargaining.
15:57 Peter: And the law prohibits employers from interfering with that right. And so the argument is that although the Federal Arbitration Act states that arbitration agreements must be enforced, employees can't be made to waive their class action rights under the NLRA because it would interfere with their right to work collectively with one another to represent their interests. But the Court says, "No, no, no. The National Labor Relations Act does not protect class action rights, and therefore, you have to enforce the class action waivers."
16:29 Michael: Right.
16:30 Rhiannon: Yeah, just to make it clear, though, what the Supreme Court is interpreting in this case is how two federal laws work together. There is not a constitutional question in this case, so the Supreme Court is not deciding something based on the Constitution. And I kind of just want to play out a little bit just in terms of my own understanding, like what being forced to arbitrate as an employee, like what that kind of looks like versus being able to take your claim to court and do... Like, what you would think of as a traditional litigation route. In college, I worked for a restaurant, I waited tables. They often shorted me on my paycheck, but over the course of like what, six months, it was probably a total of $300. And so, they did this to a ton of the staff, right?
17:16 Peter: Right.
17:16 Rhiannon: So what does it look like if we could sue as a class versus being forced to individually arbitrate?
17:23 Peter: Yeah, I mean it's fairly simple to describe class actions. Lawyers would find a problem that they think might have a bunch of victims, and you kind of try to communicate with all of them and get them to sign some agreements and represent all of them in the class action, and you can recover all of the money owed to all of them at once, and you split it amongst everyone who's part of the lawsuit. Arbitration, you have an arbitrator, that's just some organization that does this, like the American Arbitration Association is one of them, and they all have an arbitrator for you, and you go before them, and the procedures are much less complex, your options are much narrower, and the arbitrators themselves tend to be from industries that are sympathetic to employers.
18:08 Peter: And as a result, not only are you less likely to win and more likely to win less even when you do win, but the cost of the actual arbitration is super low for the employers.
18:20 Rhiannon: Yeah, so if I had gone to my employer, I'm sure there was a similar clause about arbitration. It's not only that I would be limited from doing a class action lawsuit or suing them the traditional way in court, but I would have to arbitrate by the terms that they also set out in the arbitration clause of that contract. So they might say that I have to go through certain arbitrators, they might say that arbitration has to happen in a certain state that's not my home state. What else?
18:49 Peter: It can be governed by one state's laws rather than another. They can pick a favorable state's laws and have them apply.
18:56 Michael: Right.
18:56 Rhiannon: So if I was shorted about $300 by the restaurant, it would have cost more for me to take that claim to arbitration than I would have ever recovered, right?
19:06 Peter: Yeah, yeah, absolutely. So if you file a class action in court, there's a filing fee of a few hundred bucks, but that's generally gonna be paid by the attorneys on behalf of the whole class. If you go to arbitration, there is also a filing fee. It's not huge. It varies from arbitrator to arbitrator, but we're definitely talking about a couple hundred bucks at least. So you would have to pay a fee that is worth as much, if not more, than your actual claim. All of which to say, there's absolutely no reason to do it in those circumstances.
19:40 Peter: I think this is a pretty good time for an ad.
19:44 Peter: Alright, this case is a good example of the standard conservative approach to workers' rights. Whenever the balance of power between employers and employees is questioned, conservatives on the Court will say that it's an issue of workers' choice, that is, workers have the right to sign or not sign these agreements, as they see fit. That of course ignores the massive imbalance of power between employers and employees. So, again, the NLRA, the National Labor Relations Act, protects employees who, "engage in concerted activities for the purpose of mutual aid or protection."
20:20 Peter: So the argument from us would be that the phrase "other concerted activities" has historically been interpreted very broadly and should probably include class action lawsuits, but Gorsuch says that it doesn't. Now, there's no doubt that engaging in a class action lawsuit is a "concerted activity" in the literal sense, but Gorsuch applies a principle of interpretation called... I think I'm gonna butcher this, but ejusdem generis.
20:48 Michael: Yeah, no, I think that's right, ejusdem generis.
20:51 Peter: Which means that where there is a list of specific words followed by a general word, you interpret the general word in the context of those specific words. For example, if I said cars, motorcycles, buses and other vehicles, you probably wouldn't interpret other vehicles to include space ships, it's just a little outside of the boundaries of the prior parts of that list. And so he's saying that this law protects "self-organization, forming unions, collective bargaining and other concerted activities," and that the other concerted activities part needs to be read to only include similar union-specific activities, but not class actions. And the problem with this logic is that the phrase "other concerted activities" is obviously just a catch-all, it's a broad term in a statute that has the broad purpose of protecting the ability of workers to collectively protect and vindicate their rights.
21:48 Peter: So if you want to argue that the term "other concerted activities" does not mean what it literally says, you should have a pretty specific and concrete reason for doing that. But Gorsuch doesn't have that. Instead, he has this vague and easily manipulated principle of statutory interpretation, which he uses to artificially limit the scope of the statute. The law protects concerted activity, class action is literally a concerted activity, so the conservatives who claim to rely on the text of the law have to create a textual interpretation where they replace the literal meaning and just say what they feel like it means.
22:25 Michael: Right. And these sorts of canons, the textual canons, like ejusdem generis, there are, I think, over a hundred of them that the Court likes to cite to, that are like little rules of how to read statutes.
22:38 Rhiannon: Law school fucking rots your brain.
22:41 Peter: It really does. It really does.
22:41 Rhiannon: It's bad.
22:42 Michael: And this won't be the first time ever I refer to like 1950s academics, but there's one named Karl Llewellyn who had a list of canons of construction, and then he had a list of counter canons and how they could basically cancel each other out and a judge can just pick and choose which canons get them where they want to be, so it's all just rhetorical bullshit is the thing to remember.
23:06 Peter: Absolutely. Another thing that's legally important here is that the Federal Arbitration Act, which again says that arbitration agreements need to be enforced according to their terms, but the NLRA, if you buy our argument, says that you can't use those agreements to have employees waive their class action rights. So these statutes conflict, assuming that we are right and we are. Gorsuch brings in another principle of statutory interpretation, that courts should try to interpret statutes so that they don't conflict, basically arguing that you want to keep the National Labor Relations Act narrow, just so it doesn't conflict with the Federal Arbitration Act. This principle that you should read statutes in ways that avoids conflict never really made sense to me, at least not as a general rule.
23:53 Peter: It treats laws as if Congress is like designing them to fit perfectly together like a puzzle. But in reality, Congress from one law to the next, from one decade to the next, is completely different, we're just talking about completely different goals, and so I think a lot of laws conflict with one another, and if it seems like they do, you need to think about why they conflict and then give purpose and effect to those laws in ways that make substantive sense. All of this statutory interpretation bullshit obscures the true issue here.
24:27 Peter: The entire purpose of the National Labor Relations Act is to address unequal bargaining power between employees and management. Gorsuch starts this opinion by saying workers should be allowed to choose whether they enter into these agreements, but you can't discuss worker choice without discussing the fact that employers have enormous leverage over employees in most negotiations. Employees need jobs to survive, and that means that turning one down literally poses an existential risk to most workers. And when you're talking about arbitration agreements and class action waivers, you have to account for the fact that a high percentage of employers use them, so if you decide that you won't agree to them, you're not just turning down one job, you're turning down a huge number of jobs. In some industries, essentially every employer or actually every employer implements these provisions, so saying that you choose not to agree with them would write you out of working in those industries entirely.
25:23 Rhiannon: Yeah, exactly. To go back to my experience waiting tables, yeah, I guess I could have refused to take a job with that restaurant chain, but I needed a job, and there weren't other options for having this job where all my legal rights would be easily vindicated because there's this other option for working for somebody who doesn't have these bullshit clauses in their employment contracts.
25:48 Peter: This imbalance between employees and employers is the entire purpose of the NLRA, and that's why I think Gorsuch's framing gives away how bad faith his opinion is here. He says that this is a matter of workers' choice, without acknowledging and addressing that the whole point of the NLRA is to account for unequal bargaining power between workers and management. And as we mentioned in our Janus episode, just a couple of episodes ago, conservatives will often weaponize the idea of choice to obscure these imbalances and, like we mentioned earlier, I think that these arguments, they only work in this country because they are targeting a deep part of the American ethos, the idea that people should be allowed to choose. It's really, really hitting the center of the American brain. These arguments are effective here in ways that they're not in other countries at all, which is probably why American labor law is so fucking terrible.
26:41 Rhiannon: And I just want to make a quick point about Justice Gorsuch and his legal background before he was a Justice on the Supreme Court. So he starts his legal career at this firm called Kellogg Huber, which is known as this uber elite sort of boutique litigation firm, and while he was there, back in 2005, he wrote in a brief denouncing class actions that "the problem is that securities fraud litigation imposes an enormous toll on the economy, affecting virtually every public corporation in America at one time or another, and costing businesses billions of dollars in settlements every year." Now, that's about securities class actions specifically, but note that the problem that he's pointing out is the cost to corporations of litigating class actions and not the cost to our society for securities fraud.
27:39 Michael: Yeah. My poor baby Frito Lays is taking a big hit and I need to protect it.
27:48 Rhiannon: Yeah.
27:49 Michael: The thing here is, it's not just that conservatives are hypocritical in the way they deploy their concern for workers' choice, though they are, nor is it just that they're using the idea of workers' choice here in a particularly bullshitty way, though that is also true. [chuckle] The thing is that all of these negotiations that they're talking about takes place in sort of the shadow of the state and its coercive power, and that's not just to say the Federal Arbitration Act and the National Labor Relations Act and whatever else shape these negotiations, though they do, but very basic, fundamental policy choices, like whether to live in a capitalist or a communist or a socialist society, choices that are then enforced with the power of the state, shape this.
28:42 Michael: You know, the question of whether you even need to work to get food is a basic policy question that like Andrew Yang, who's a proponent of universal basic income, might say, you shouldn't. And that would change your bargaining position, right? So what's happening here is not a question about whether or not workers have choice, that's hiding the state's role by putting this on the workers. The question is, how do we distribute the state's power of coercion and on whose behalf should we be concerned?
29:16 Peter: Yeah, we don't even need to use universal basic income. You can imagine a more robust welfare state putting people in a position where they might be able to turn down jobs more readily if they believe that they are agreeing to something that would negatively impact them down the road. There are a thousand ways in which government policy dictates the fact that employees don't have much of a choice here.
29:43 Michael: Right. And look, if the last discussion felt like a little too sort of theoretical, I think right now, COVID makes this all feel very concrete. It's obviously a very precarious situation out there, but there are some cities that are like cancelling rent or putting freezes on evictions. There were bills in Congress to give people $2000 a month, which would help them pay rent and buy food. And you can imagine a world where your city froze rent and where you're getting $1000 or $2000 a month from the government, and in that world, maybe you're not willing to accept unsafe conditions from Amazon, you're not willing to be forced to go tend bar in some crowded bar where people aren't wearing masks and there's no social distancing.
30:35 Michael: And on the other hand, people who are living in the current situation, if they're on the verge of getting evicted, they're not free to bargain for a better arbitration agreement. Like are you fucking kidding me? Like it's an absurd idea. These are the choices that we make as a society, and that the Supreme Court is hiding when they talk about worker choice and negotiation and all that bullshit that they fill these opinions with.
31:03 Peter: Right. So the result of this decision is very clear. Employers can now require as a condition of employment that employees forfeit their right to a class action. So it's important that we talk about what this means in practice. We've covered some of this, but class actions have a lot of value. What makes them really irreplaceable is in circumstances where a large number of people have each sustained a small amount of damage. A large company fails to pay certain wages to a bunch of employees. In those cases, as we mentioned, often not worth it for a single employee to bring a lawsuit, but if you can act collectively, it makes sense to do it.
31:38 Peter: So the function here is that companies will now get away with wage theft because employees have no realistic means to recover their money. If you get screwed out of $700, it's rarely gonna be worth your time and energy to try to recover it, even if that means making next month's rent, putting food on your kid's table, etcetera. And if you think this is a minor problem, know that wage theft in the United States accounts for the vast majority of theft in the country. The Economic Policy Institute in 2014 calculated the combined cost of minimum wage, overtime, rest break and off-the-clock violations at about $40 billion per year. By contrast, larceny just over $5 billion, robbery, about $4 billion. So what we're talking about is a problem that dwarfs traditional forms of theft.
32:26 Rhiannon: Yes, I'm always gonna be obsessed with what the criminal law analogue is to all of this. We have very intense criminal laws that address when somebody does theft, when an individual does theft. My clients face terms of years or their lives for robbing somebody.
32:52 Michael: The more violent crimes, right?
32:54 Rhiannon: Yes.
32:54 Michael: Right, but I think wage theft is violent. It's just a hidden violence, right? It's the violence of not having a roof over your head or not having something to eat, or being denied those things.
33:08 Rhiannon: Yeah, it's what violence that we choose as a society to condemn. It's also about who does which kind of theft, right? People of color are, by and large, not the owners of large corporations. People of color can be arrested and punished harshly for the individual kind of theft that our criminal laws address.
33:29 Michael: Right, the victims of this are the people that we as a society turn our eyes away from. And so injustices aimed at them don't have this sort of visceral impact, it's just not as visible for us.
33:43 Rhiannon: Yep, exactly. One thing to think about it and talk about the impact is that the minor wage stuff that I experienced as a restaurant employee, that was remedied, not by having to go to court, but because I have the ability to look at my paycheck and know what I should have been paid, calculate the difference, and also just be a vocal employee and take it to my boss immediately, but if you think about the impact that that might have on somebody who, for example, is undocumented or anybody who might not have, say, the requisite literacy skills or just the power to approach a boss and to say, I think there's something wrong and I think that you owe me money.
34:28 Michael: And I also want to add, when I bused tables and tended bar, I never even thought to look at my paycheck to compare my hours and pick my tips, I was just like, alright, this was a slow week or this was a fast week or even if it seemed low I'd just be like, man, it sucks. And the idea of being like, "I think my boss is shorting me," that never once crossed my mind and I never once heard any of my co-workers talking about it.
34:56 Rhiannon: Yeah. Oh, hey, we should go to an ad.
35:00 Peter: Alright, I think putting this case in its historical context is important. The Federal Arbitration Act is passed in 1925, I believe, because some lawyers' associations thought it would be useful for old-timey merchants to be able to agree to avoid litigation. I think you guys know me well enough to know that I love to imagine old-timey business, and so I'm picturing 100 years ago, all of business, it was just one guy, he would have a wheelbarrow full of coal, and another guy would be like, "I'll give you seven candles for it," and he's like, "You got yourself a deal there, buddy, but I would like to agree to arbitration," and he was like, "Yes, we must avoid the purity of traditional litigation." [laughter]
35:45 Peter: That's the milieu in which the Federal Arbitration Act exists. Now, there's like three employers in the country, it's Amazon and Walmart and Goldman Sachs, and they are just raining down like arbitration hell fire upon innocent workers, and the Court is acting as if you can just treat the statute the same way. The statute wasn't always viewed this broadly, the Federal Arbitration Act. In the past several decades, the Court has turned this sort of like archaic law into what I think is one of the most powerful laws in the country.
36:16 Peter: Here we have the Court functionally casting aside a broad law protecting labor rights. In other cases, the Court has held that states can't even pass laws restricting arbitration. Several states tried to make class action waivers illegal, but the court claimed that those laws must be struck down because they conflict with the Federal Arbitration Act, and that the Federal Arbitration Act overrides them.
36:40 Rhiannon: Yeah, when we're talking about this, I feel like Allen Iverson in the, "We talking about practice" interview, like, wait a second, we're talking about arbitration right now? Are you fucking kidding me? No, no, no, no, I thought we were talking about wage theft. I thought we were talking about overtime pay, no, we're talking about arbitration? This is bullshit.
37:01 Peter: And to give you a sense of how expanded this law has become, as recently as 20 years ago, it wasn't even clear that the Federal Arbitration Act applied to employees. In fact, the literal reading of the law makes it fairly clear, in my view, that it doesn't, but the Court inexplicably held in a 2001 case called Circuit City v. Adams, that it does, paving the way for decisions like Epic Systems, so the Supreme Court has injected life into the corpse of this 100-year-old statute to the point where it applies in contexts that no one previously thought it did and can nullify any state or federal laws that conflict with it.
37:38 Rhiannon: And just to go back to how the Lochner era is viewed now, everyone on the Supreme Court agrees, and will say that the Lochner era is a bad time in Supreme Court history. Conservatives are famously against judicial activism. John Roberts himself, the umpire himself, during his confirmation hearings, said, "You go to a case like the Lochner case, you can read that opinion today, and it's quite clear that they're not interpreting the law, they're making the law," and I think Ruth Bader Ginsburg in dissent in this case, in Epic Systems, she does a really good job of saying that what the majority is doing is some Lochner era bullshit, and it harkens back to this recognition of the fake freedom of contract, but it's worth emphasizing that conservatives today, they now know that publicly they're supposed to say they're against the Lochner era judicial activism, but they will still employ it, obviously.
38:35 Michael: The mode of constitutional interpretation that the Court engaged in at the turn of the last century has been just completely discredited, and very few people will defend it. So what you have here is the current Supreme Court trying to reimpose the norms and the values that were evident in those decisions, but doing it pursuant to its powers of statutory interpretation. Rather than citing to the freedom of contract, they are building in these ideas of worker choice and freedom and negotiation into these statutory interpretation questions in a way that ends up recreating those economic conditions.
39:22 Peter: And probably a good time to note, we're not really talking about the dissent here mostly, 'cause the dissent's good, Ginsburg has a pretty strong dissent here, one of the better ones that she's written in the past several years, so nothing to say about it. Thanks for doing your job, Ruth.
39:37 Rhiannon: For once, Ruth. Ruth had the smelling salts that day in Court and was like...
39:47 Peter: So I want to talk about some later developments. There's been some fairly interesting reactions to the decision. Several companies, namely Google and Facebook gave into internal and public relations pressure and got rid of their class action waivers. Those companies don't employ a lot of low wage workers who are most impacted by it, so it's not the biggest deal in my mind, but certainly interesting that there has been a coordinated and successful at times PR effort against these. Maybe the most interesting and positive development was the tactic employed in the DoorDash case.
40:21 Rhiannon: Yes.
40:21 Peter: Even before this decision came down, there was talk amongst plaintiffs' attorneys of using class action waivers against employers by organizing employees and having them file hundreds or thousands of individual arbitrations, the burden of which would be greater than any class action. And after Epic Systems comes down, they actually did it. DoorDash is a food delivery service app, and they're sued by drivers who claim that they should have been treated as employees, but were actually treated like independent contractors, so they sued for wages and benefits, but class actions are forbidden under the arbitration agreements they all signed. So the drivers went ahead and filed over 5000 individual arbitration claims.
41:07 Rhiannon: It's so bad ass.
41:08 Peter: The result of this is that DoorDash not only has to individually defend all of them, but each arbitration costs DoorDash a fee, leaving them with $12 million in fees right off the bat before the case is even started.
41:22 Rhiannon: Beautiful. [chuckle] Beautiful.
41:24 Peter: Ironically enough, DoorDash, they get desperate and they request a class action which the judge not only rejected but outright mocked because, of course, they had forced their employees to agree that they would not use class action. A similar tactic was used against Uber last year. Tens of thousands of drivers filing individually and Uber reportedly being forced to settle the vast majority of the claims. This stuff isn't a cure to the problem that this case created, it takes a lot of effort, a lot of coordination and money to pull this tactic off. This stuff is all spearheaded by plaintiffs' attorneys who generally belong to large plaintiff-side firms. It's an enormous effort. That said, while you can't expect it to be used with any frequency, this tactic has caused a lot of large companies to re-evaluate whether or not class action waivers are worth it, and I'm sure are something right now that management side attorneys are figuring out what kind of fucking cheap loophole they can utilize to shut this down.
42:28 Peter: For now, though, a lot of the big players in this space, the Amazons, the Ubers, the Lyfts of the world that are reliant upon contractor labor to a large degree, they are all very nervous about this tactic, and it has sort of changed their approach here. Some rare good news to wrap up the episode.
42:48 Rhiannon: Get their asses.
42:50 Michael: Direct action works.
42:56 Peter: Next week is Bennis v. Michigan, a case about civil forfeiture, which is the rights of cops to roll up on you and be like, "What are you holding?" And you'd be like, "It's my phone," and they would just take it. That's probably a slight over-simplification, but learn more next week.
43:18 Rhiannon: Follow us on Twitter @fivefourpod, bitch.
43:22 Peter: Cut that. Cut that. [laughter] Language.
43:28 Michael: 5-4 is presented by Westwood One and Prologue Projects. This episode was produced by Katya Kumkova with editorial oversight by Leon Neyfakh and Andrew Parsons. Our artwork is by Teddy Blanks at CHIPS NY and our theme song is by Spatial Relations.
43:49 Leon: From the Westwood One Podcast Network.