The FAA and NLRA Go Head to Head in Epic Systems
By Olivia Hoffman and Katie Rosoff
The Supreme Court first approved the use of mandatory arbitration provisions in employment contracts in 1991 in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 31 (1991), which held that a securities broker could be compelled to arbitrate a federal age discrimination claim against his employer under the Federal Arbitration Act (“FAA”). In the years since, arbitration agreements have proliferated in employment and consumer contracts, and legal challenges to the validity of these agreements have been largely unsuccessful. While the general policy in favor of arbitration remains strong, it comes into potential conflict with the National Labor Relations Act (“NLRA”) in the case of Epic Systems Corp. v. Lewis, which the Supreme Court will decide this term.
The case presents the question of whether mandatory individual (i.e., non-class) arbitration agreements in employment contracts violate the NLRA, which protects the right of workers to bargain collectively. Three circuit courts have weighed in, with the Seventh and Ninth Circuits holding in Lewis v. Epic Systems Corporation, 823 F.3d 1147 (7th Cir. 2015) and Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), respectively, that a ban on litigating or arbitrating on a class basis violates the NLRA’s collective bargaining guarantee, and the Fifth Circuit coming to the opposite conclusion in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015). Each of these cases arose when employees filed class action lawsuits against their employers based on labor law violations and the employers moved to compel arbitration.
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