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May 23, 2018

Supreme Court ruling in EHR vendor case affirms mandatory arbitration in employment contracts

Daily Briefing

    The Supreme Court on Monday issued a 5-4 ruling that allows U.S. employers, including those in the health care sector, to use arbitration clauses to prohibit workers from coming together in a class-action lawsuit to challenge potential labor law violations.

    Case details

    The case consolidated three lawsuits, including one filed by EHR vendor Epic, and centered on whether a National Labor Relations Act (NLRA) provision that grants employees "the right … to engage in … concerted activities for … mutual aid or protection" displaced a provision in the Federal Arbitration Act (FAA) that mandates the enforcement of arbitration clauses in employee contracts.

    Specifically, the case examined the legality of arbitration agreements included in employee contracts that require workers to individually arbitrate work-related disputes. For instance, in the lawsuit involving Epic, Jacob Lewis, a technical writer at Epic, claimed that the EHR vendor had violated the Fair Labor Standards Act and Wisconsin state law because the company did not compensate him and other employees for overtime work as a result of a misclassification in their employment status. In the lawsuit, Lewis also claimed that an arbitration clause in Epic's employee contracts violated NLRA because the clause deprived him of an opportunity to take collective action against the company, Healthcare IT News reports.

    Epic attempted to enforce the arbitration clause and sought to have the lawsuit dismissed. A lower court refused to dismiss the suit, and the U.S. Seventh Circuit Court of Appeals eventually ruled that NLRA protects workers' rights to take collective legal action against their employers.

    Epic in 2016 petitioned the Supreme Court to hear the case, claiming that the arbitration clause in its employee contracts was consistent with NRLA. The Supreme Court agreed to hear the lawsuit in a consolidated case to determine "whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive[s] class and collective proceedings, is enforceable under the [FAA], notwithstanding the provisions of the [NLRA]."

    Ruling details

    The Supreme Court ruled that companies are allowed to use arbitration clauses in employee contracts to prohibit workers from coming together in a class-action lawsuit to challenge potential labor law violations, the New York Times reports.

    Justice Neil Gorsuch in the Court's majority opinion wrote, "The policy may be debatable, but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written." He continued, "While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the [FAA]. Because we can easily read Congress' statutes to work in harmony, that is where our duty lies."

    Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy, and Clarence Thomas joined the majority opinion. 

    Justice Ruth Bader Ginsburg in a dissenting opinion wrote that, as a result of majority's decision, "there will be huge under-enforcement of federal and state statutes designed to advance the well-being of vulnerable workers." Ginsburg noted that FAA was enacted in 1925 and took effect before federal labor laws, and should not allow employers to subject their employees to "arm-twisted" or "take-it-or-leave-it" clauses in contracts. Ginsburg urged Congress to "correct the court's elevation of [FAA] over workers' rights to act in concert."

    p>Justices Stephen Breyer, Elena Kagan, and Sonia Sotomayor joined the dissenting opinion.


    According to the Washington Post, the court's decision could affect as many as 25 million U.S. workers across industries. While the case involved the EHR vendor Epic, the ruling does not have special implications for the health care industry, Modern Healthcare reports.

    Fatima Goss Graves, president and CEO of the National Women's Law Center, said, "Employees may now be forced behind closed doors into an individual, costly—and often secret—arbitration process." She added, "This will stack the deck in favor of the employer."

    Ron Chapman, who represents a company's management in labor disputes, said he expects the ruling will prompt more small and large businesses to implement binding arbitration contracts to avoid costly class-action verdicts in jury cases. "It gives employers the green light to eliminate their single largest employment law risk with the stroke of a pen," Chapman said.

    However, Gregory Jacob, a lawyer at O'Melveny & Myers, said he does not expect the ruling will result in a "huge increase" in employer arbitration provisions. "Most employers expected this decision, and did not hesitate where desired to insert individualized arbitration provisions into employment agreements," he said.

    Epic CEO Judy Faulkner said, "It is important that employers protect an employees' right to file complaints, while also providing for a fair forum in which those grievances are addressed. When it comes to grievances regarding wages and hours, we believe individual arbitration agreements strike that reasonable balance and are pleased with the court's decision in support of this" (Miliard, Healthcare IT News, 5/21; Liptak, New York Times, 5/21; Totenberg, "All Things Considered," NPR, 5/21; Barnes, Washington Post, 5/21; Robbins, SCOTUSblog, 5/12; Arndt, Modern Healthcare, 5/21).

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