Forced Arbitration and Employee Rights: ERA 2022, PAGA, and Epic Systems

Over 60 Million American Workers Cannot Sue Their Employer in Court

A 2018 Economic Policy Institute analysis found that more than 60 million non-union private-sector workers were subject to mandatory arbitration agreements — a figure that had grown fivefold since 1992. These agreements, typically signed as a condition of employment with no negotiation permitted, require employees to bring all workplace claims — wage theft, discrimination, harassment, wrongful termination — before a private arbitrator rather than a judge or jury. The arbitrator is often selected from a list maintained by providers such as the American Arbitration Association (AAA) or JAMS. Employers, as repeat clients paying the fees, have been documented by repeat-player studies to win at significantly higher rates than in civil courts.

Epic Systems Corp. v. Lewis (2018)

The Supreme Court's 5-4 decision in Epic Systems Corp. v. Lewis consolidated three cases asking the same question: does the National Labor Relations Act (NLRA), which protects workers' rights to engage in "concerted activities," override the FAA's command to enforce arbitration agreements with class action waivers?

Justice Gorsuch's majority held that it does not. The NLRA's Section 7 protects the right to organize and collectively bargain — not the right to pursue class action litigation. Class actions are a procedural mechanism, not a substantive right Congress guaranteed to workers. The FAA's enforcement mandate controlled. Individual arbitration agreements with class and collective action waivers are enforceable in the employment context.

• The decision affected all private-sector employees subject to the FAA
• Class and collective action waivers — including FLSA collective actions — became fully enforceable
• The ruling effectively ended most wage theft class actions for employees subject to arbitration clauses
• Justice Ginsburg's dissent called the decision "egregiously wrong" and called on Congress to act

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (ERA 2022)

Signed into law March 3, 2022, the ERA Act is the most significant legislative modification to the FAA in its nearly 100-year history. It amends the FAA to prohibit pre-dispute arbitration agreements and joint-action waivers from being enforced for claims involving sexual harassment or sexual assault occurring on or after the enactment date.

Key mechanics:

• A claimant with a covered sexual harassment or sexual assault claim may elect to bring the claim in court, notwithstanding any arbitration agreement previously signed
• Courts — not arbitrators — decide whether the ERA Act applies to a particular claim; the arbitrator cannot rule on their own jurisdiction over covered claims
• The right is personal to the claimant; employers cannot waive it prospectively in an employment contract
• The Act covers sexual harassment under any federal, state, or tribal law — Title VII, state FEHA statutes, and others
• Independent contractors and gig workers are covered, not just employees

California's PAGA Workaround

California's Private Attorneys General Act of 2004 (PAGA) allows employees to sue their employer on behalf of the State of California and co-workers for Labor Code violations — collecting 75% of recovered penalties for the state and 25% for the aggrieved workers. The Supreme Court in Viking River Cruises v. Moriana (2022) ruled that employers can compel individual PAGA claims to arbitration but cannot force employees to waive the representative (non-individual) portion of PAGA claims. The California Supreme Court subsequently clarified in Adolph v. Uber Technologies (2023) that a plaintiff whose individual PAGA claim goes to arbitration retains standing to pursue representative PAGA claims in court on behalf of co-workers.

PAGA survived as a meaningful tool. Wage theft cases in California involving dozens of employees can still be litigated as representative actions even under mandatory arbitration regimes — a structural advantage California employees hold over most of the country.

Amazon, Uber, and the Opt-Out Campaigns

In 2018, thousands of drivers and delivery workers at companies including Amazon, Lyft, and DoorDash engaged in mass arbitration campaigns — filing thousands of individual arbitration demands simultaneously, overwhelming the companies' arbitration systems and generating enormous filing fees (borne by the employer under AAA and JAMS rules). Amazon responded in 2021 by removing mandatory arbitration clauses covering sexual harassment claims even before the ERA 2022 was passed. Several other tech companies followed, recognizing that mass arbitration had inverted the economics companies had assumed would favor arbitration.

Uber's terms of service included a 30-day opt-out window for new users and drivers, which advocates have used to exempt participants from arbitration before claims arise. Awareness of these opt-out rights — which require affirmative action within a narrow window — remains low among workers.

This article is for informational purposes only and does not constitute legal advice.