The State Qui Tam to Enforce Employment Law

Abstract

This Article examines the states’ response to Epic Systems v. Lewis, which held enforceable under the Federal Arbitration Act (FAA) mandatory arbitration agreements that require employees to waive their participation in collective and class actions in employment contracts. Recent evidence shows that mandatory arbitration can erode access to justice for and deterrence of employment law claims. States in response are considering qui tam statutes, which assign the state interests in penalties for employment law violations to private enforcers in return for a bounty, to substitute for the loss of class action enforcement after Epic Systems.

These statutes can increase deterrence and access to justice, and do not implicate the FAA so long as the claim belongs to the state. But the Supreme Court’s FAA jurisprudence evinces a hostility to statutes that permit an end run around class action waivers. It is an open question at what point a qui tam statute requires waiver under the FAA for insufficiently distinguishing between the private and public interests in enforcement. Current due process protections do not sufficiently protect against this threat, or the interests of states and the affected employees. This Article offers the safeguard of agency oversight, often required by state nondelegation doctrine, to protect state qui tam statutes from FAA preemption by constraining qui tam claims to those that serve a distinct, public interest. Meaningful public agency oversight over the resolution of qui tam claims would protect the interests of the states and enable agencies to protect the interests of aggrieved employees. States can also reduce incentives for misuse of qui tam enforcement that harms the interests of aggrieved employees by extending qui tam enforcement to nonprofit public interest corporations as representative organizations.

Keywords: Qui Tam, Employment Law, Mandatory Arbitration, Class Action, Private Enforcement, Wage and Hour Law, Epic Systems

JEL Classification: J83, K31, K42