Epic Systems Corp. v. Lewis: Supreme Court Approves Class Action Waivers In Employment Arbitration Agreements - Articles

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Posted by: Melanie Siemens on Aug 6, 2018

On May 21, 2018, the U.S. Supreme Court ruled in Epic Systems Corp. v. Lewis[i] that arbitration agreements requiring an employee to arbitrate disputes against an employer individually (as opposed to class or collective actions), are enforceable under the Federal Arbitration Act (FAA)[ii] and do not violate the National Labor Relations Act (NLRA).[iii] The 5-4 decision resolves a circuit split and affirms the validity of class and collective action waivers in employment arbitration agreements. 

Background

The opinion resolved three consolidated appeals: Epic Systems Corp. v. Lewis from the U.S. Court of Appeals for the Seventh Circuit,[iv] Ernst & Young LLP v. Morris[v] from the Ninth Circuit, and National Labor Relations Board v. Murphy Oil USA from the Fifth Circuit.[vi]

The three cases are factually similar. Generally, each case involved an employee who had entered into an arbitration agreement with the employer in which the employee agreed to resolve disputes in individual arbitration, and later sought to pursue a class or collective action against the employer in court. The employers in each case moved to compel individual arbitration pursuant to the terms of the agreements. The circuits split on whether the agreements requiring individual arbitration violate Section 7 of the NLRA by prohibiting an employee’s right to participate in “concerted activities.”[vii]

When the Supreme Court granted certiorari in the three appeals, it was anticipated the Court would provide guidance on the interplay between the FAA, which mandates the enforcement of arbitration agreements, and the NLRA’s Section 7 protections.

The Supreme Court’s Opinion

Writing for the majority, Justice Gorsuch posed the question before the Court as follows: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?”[viii] The Court responded that “as a matter of law the answer is clear.”[ix] The Court held arbitration agreements providing for individualized proceedings are enforceable under the FAA, and nothing in the NLRA suggests otherwise. Justice Gorsuch was joined in the majority opinion by Justices Roberts, Kennedy, Thomas and Alito. 

The Court began its analysis by explaining the history of the FAA, which was enacted by Congress “in response to a perception that courts were unduly hostile to arbitration.”[x] Through the FAA, Congress manifested a “liberal federal policy favoring arbitration” and not only instructed courts to enforce arbitration agreements, but “also specifically directed them to respect and enforce the parties’ chosen arbitration procedures” – including terms providing for “individualized rather than class or collective action procedures.”[xi]

Moreover, the Court concluded that the FAA can be read harmoniously with the NLRA, and nothing in the NLRA trumps the FAA’s mandate that arbitration agreements be enforced. The Court reasoned that the NLRA focuses on the right to “organize unions and bargain collectively” but “does not express approval or disapproval of arbitration,” nor does the NLRA “mention class or collective action procedures.”[xii] Accordingly, the NLRA “does not even hint at a wish to displace the [FAA] – let alone accomplish that much clearly and manifestly, as our precedents demand.”[xiii] Nor did the Court detect Congressional intent for the NLRA to trump the FAA: “It’s more than a little doubtful that Congress would have tucked into the mousehole of Section 7’s catchall term [“other concerted activities”] an elephant that tramples the work done by [the FAA], flattens the parties’ contracted-for dispute resolution procedures; and seats the [National Labor Relations] Board as supreme superintendent of claims arising under a statute that it doesn’t even administer.”[xiv] Finally, the Court declined to give deference to the conclusion of the National Labor Relations Board (NLRB) that the NLRA supersedes the FAA.

The Court concluded by stating that policy discussions regarding class actions and individual arbitration “are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches.” While it is the role of Congress to make such policies, the “law is clear,” and “[b]ecause [the Court] can easily read Congress’s statutes to work in harmony, that is where our duty lies.”[xv] Accordingly, the Court affirmed the judgment in Murphy Oil, and reversed and remanded the judgments in Epic Systems and Ernst & Young for further proceedings consistent with its opinion. 

Justice Ginsburg wrote the dissenting opinion, which was joined by Justices Breyer, Sotomayor and Kagan. Calling the majority opinion “egregiously wrong,”[xvi] the dissent conducts a lengthy examination of the history and significance of the NLRA. The dissenting opinion asserts that class and collective actions fall within the NLRA’s definition of “other concerted activities”[xvii] and concludes any limitation on those rights should be held unenforceable in arbitration agreements.

Take-Aways

Epic Systemsprovides employees and employers with clarity regarding class and collective action waivers in employment arbitration agreements. The NLRB issued a statement that it “respects the Court’s decision, which clearly establishes that arbitration agreements providing for individualized proceedings and waiving the right to participate in class or collective actions, are lawful and enforceable.”[xviii]


Any views or positions in this post are the author’s alone, and do not necessarily represent the views or position of Dollar General.

Melanie Siemens is a Senior Employment Attorney at Dollar General Corporation. Ms. Siemens graduated from Vanderbilt University and the Louis D. Brandeis School of Law at the University of Louisville (JD, 2008). She may be reached at msiemens@dollargeneral.com.


[i]          138 S. Ct. 1612 (2018)

[ii]          9 U.S.C. §§ 1 et seq.

[iii]         29 U.S.C. §§ 151–169

[iv]         823 F.3d 1147 (7th Cir. 2016)

[v]          834 F.3d 975 (9th Cir. 2016) 

[vi]         808 F.3d 1013 (5th Cir. 2015)

[vii]        Specifically, Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . ., and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U. S. C. §157.

[viii]        138 S. Ct. at 1619

[ix]         Id.

[x]          Id. at 1621

[xi]         Id.

[xii]        Id. at 1624

[xiii]        Id.

[xiv]             Id. at 1627

[xv]              Id. at 1634

[xvi]        Id. at 1633

[xvii]       29 U. S. C. §157