Supreme Court Upholds Class Action Arbitration Waivers

Posted: August 7, 2018 

It has long been the case that the United States Supreme Court generally waits to hand down its most controversial decisions until the end of its yearly session (which usually ends in June).  In a split opinion authored by Justice Gorsuch, in Epic Systems Corporation v. Lewis, 138 S.Ct. 1612   (2018), the Supreme Court continued this trend by handing down a highly controversial decision on class action arbitration waivers.

In Epic Systems, the Supreme Court consolidated three lower court cases to reconcile the broad mandates of two competing federal laws: The Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA).  On the one hand, the FAA promotes a broad policy in favor of enforceability of arbitration agreements, providing that such agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” This language is commonly referred to as the “savings clause.” On the other hand, Section 7 of the NLRA protects employees’ rights to, among other things, to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protections.”  While the Supreme Court has previously held that the FAA preempts state laws invalidating class action arbitration waivers in the context of commercial agreements, the particular issues related to “concerted activity” in the employment context remained unresolved.  Further complicating matters, various federal courts of appeals reached conflicting results when tasked with resolving the issue.  Indeed, While the Seventh Circuit and the Ninth Circuit found the NLRA to prevail over the FAA, the Fifth Circuit reached the opposite conclusion.  The Supreme Court granted certiorari to resolve the split in the circuits. 

Speaking for the majority, Justice Gorsuch first announced the position that the Court should attempt to “harmonize” two seemingly irreconcilable statutes whenever possible. Turning to the NLRA, the majority found that the language of Section 7 neither approves or disapproves of arbitration or class or collective proceedings. The majority then rejected the argument that arbitration is subsumed within the “other mutual aid or protections” language on the grounds that this language cannot be read in isolation from the remainder of the clause which protect “things employees ‘just do’ for themselves” as part of exercising their associational rights in the workplace.

On a larger scale, the majority observed that while the “broader structure” of the NLRA spells out a complex regulatory scheme (including establishing rules for adjudicatory proceedings under its provisions), the NLRA is noticeably silent as it relates to the class or collective actions, both in court or arbitration. The majority then contrasted the NLRA with other statutes that do contain language speaking directly to arbitration and specifically to circumstances which may override the FAA.  Finally, the Court observed that Court precedent had stressed the fact that in the absence of any discussion of arbitration or class action, the Court will not find Congressional intent to displace the FAA.  With all of this in mind, the Court made the logical next step and found that the FAA and the NLRA were not at odds with each other.

While it still remains unclear whether the Epic Systems decision ultimately will signal the Supreme Court moving in a more employer friendly direction, employers relying on class action waivers can breathe a sigh of relief.  We may not have to wait very long, however, as the Supreme Court has granted certiorari on the issue of whether an employee can pursue class action arbitration when the underlying contract is silent.  In the meantime, employers should not rush into class action arbitration waivers with their workforce, but rather evaluate their operations to determine whether such an agreement is an appropriate fit for their workplace.

Please contact the Masud Labor Law Group should you have any questions over whether class action arbitration waivers are a good fit for your workforce.

This article is published by the Masud Labor Law Group, and is intended as general information only.  This article is not intended to provide legal advice or opinion, as such advice may only be given when related to specific fact situations.  Questions or comments concerning this article should be directed to the Masud Labor Law Group, 4449 Fashion Square Blvd., Ste. 1, Saginaw, Michigan, 48603, (989) 792-4499.  E-Mail: .(JavaScript must be enabled to view this email address). ©Masud Labor Law Group 2011.  All rights reserved.  Reproduction of this article in whole or in part, without express permission from the Masud Labor Law Group is prohibited.

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