EPIC Systems Arbitration Agreement: Is it enforceable?

Epic Systems Corp., (Epic) creates medical software used by many hospitals and doctor’s offices to track and maintain patient charts and communicate information to patients. On April 2, 2014, Epic sent an email to some of its employees that contained an arbitration agreement. The arbitration agreement stated that “wage-and-hour claims could be brought only through individual arbitration” and that the employee waived “the right to participate in … any class, collective or representative proceeding.” The email stated that employees were “deemed to have accepted [the] agreement” if the employees continued to work at Epic, and requested that employees acknowledged review and acceptance of the agreement by clicking a couple buttons.

First of all, what is a class action?

A class action allows a group of similarly situated individuals to join forces to act against a defendant. This option is beneficial for individuals because as a group, the individuals have more power to create change and fight the defendant. Think, strength in numbers to even the playing field. A large company defendant can easily deal with one aggrieved individual, with say, a complaint about being owed a few hundred dollars in unpaid overtime. The defendant will likely just pay the damages, settle early and be done with it. Or, a large company can bludgeon a single individual by driving up the cost of litigation by filing motions with the court making the cost benefit of litigation for one person virtually worthless. But, hundreds of individuals complaining about overtime at the same time? The defendant can’t just sweep everything under the rug so easily and the group can pool its resources.

What is arbitration?

Arbitration is an alternative dispute resolution system that is done out of court and in private. During arbitration, both parties convene and present evidence like they would in court but the judge is a privately paid third party, an arbitrator that can be chosen by both parties, but often a contractual arbitration provision will identify the “chosen” arbitrator. The arbitrator issues an opinion, and the opinion is kept private, and is not public record.

Ok, that sounds like a not half bad way to work out the dispute, what’s the big deal?

Because arbitration is a private system, disputes are kept out of public view. Arbitration has been criticized for allowing companies to keep illegal conduct hidden from the public and for allowing it to continue. Proponents of the system (most often, large corporations) have touted it as a cost-saving measure for both parties. Litigation in court can be expensive, sure. But, the advantages of arbitration tend to lean towards the company whose contract contains the clause over the individual/business seeking to enforce her/its rights under the contract. This makes sense as it was the company that put the clause in the contract and it is the company that will be using that arbitrator in the future for any other disputes.  Thus, the company is creating a quasi-business relationship with a for-profit, private arbitration provider.  Therefore, the arbitrator has a business interest in siding with the company as the company may contact the arbitrator to handle more disputes should the arbitrator side with the business.

How did the Epic agreement come to be in the news?

Jacob Lewis, a technical writer for Epic, sued Epic in federal court arguing that Epic violated Wisconsin and federal law by misclassifying him and other employees as exempt from overtime (check out KEW’s article, “Are all employees entitled to minimum wage and overtime?” for a background on exempt v. non-exempt employees). Epic attempted to boot Lewis’ claim out of federal court and into arbitration, citing its arbitration clause. Lewis won in the Western District of Wisconsin, and Epic appealed to the Seventh Circuit.

On May 26, 2016, the Seventh Circuit Court of Appeals found Epic’s arbitration clause to be in violation of the National Labor Relations Act (NLRA) and unenforceable under the Federal Arbitration Act (FAA) finding that courts interpreting the NLRA have found that the NLRA bans employers from prohibiting employees from seeking redress as a class. Accordingly, the Court found the agreement unenforceable.

Epic requested the Supreme Court to review the decision, which the Supreme Court agreed to do, likely because other circuits that have analyzed arbitration clauses in employment agreements have decided differently than the Seventh Circuit.

What is going to happen?

Great question. If I could predict the future, I would probably bet on sports, not supreme court decisions. We’ll be sure to provide updates as we hear them.

For more discussion on employment contracts or arbitration clauses contact Attorney Leslie Elkins.