The Supreme Court Reaffirms The Reach And Force Of The Federal Arbitration Act, This Time In Employment Cases
On May 21, 2018, the Supreme Court issued its long-awaited decision in the consolidated cases Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA, No. 16-307. In a 5-4 opinion by Justice Gorsuch, the Court held that courts must enforce arbitration agreements requiring employees to bring employment-related claims in individualized arbitration proceedings, and barring them from pursuing those claims as a collective or class action. The Court explained that absent a contrary congressional directive, arbitration clauses are “valid, irrevocable, and enforceable” under the Federal Arbitration Act (FAA), which reflects “‘a liberal federal policy favoring arbitration agreements.’” The Court held that such arbitration agreements do not violate employees’ statutory right under the National Labor Relations Act (NLRA) to “engage in other concerted activities for the purpose of … mutual aid or protection.” It concluded that the National Labor Relations Board (NLRB)’s contrary conclusion was not entitled to Chevron deference. Therefore, the Court held that the provisions requiring individual arbitration of employment disputes were enforceable under the FAA.
The Epic decision represents a major victory for employers. It allows them to avoid burdensome class actions and instead take advantage of the cost and speed of individualized arbitration. The decision continues the Court’s longstanding practice of enforcing the FAA according to its terms.
The Epic case began when Jacob Lewis filed a putative class and collective action in federal court against his former employer, Epic Systems Corp., alleging violations of federal and state wage-and-hour laws. Epic moved to compel individual arbitration, arguing that under the terms of an agreement that Lewis had accepted as a condition of employment, Lewis was required to bring employment-based claims through individual arbitration and not as a collective or class action. The district court held that the arbitration agreement was unenforceable, and the Seventh Circuit affirmed, deferring to the Board’s conclusion that individualized arbitration agreements violated an employee’s right to engage in concerted action under the NLRA. The Seventh Circuit’s decision conflicted with decisions from other circuits, which had held that the FAA required enforcement of such agreements according to their terms. The Court granted Epic’s petition for certiorari, along with two other petitions raising the same question, and consolidated the three cases.