In a significant decision awaited by U.S. employers since January 2017, the Supreme Court upheld the use of class action waivers in arbitration agreements. Justice Gorsuch wrote the majority opinion, which was joined by Justices Roberts, Kennedy, Thomas, and Alito. Justice Ginsburg filed an extensive dissenting opinion joined by Justices Breyer, Sotomayor, and Kagan.
The decision answers a question that has loomed large for employers: Can they include class action waivers in arbitration agreements mandating that all employee-employer disputes be resolved in one-on-one arbitrations, precluding class or collective actions? Holding such agreements enforceable, the majority said: “the policy may be debatable but the law is clear.”
The basic premise of the Arbitration Act requires courts to “rigorously” enforce arbitration agreements according to their terms, held the majority. The employees’ first argument to invalidate arbitration class action waivers centered on the Arbitration Act’s saving clause, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.” The employees argued that the arbitration agreements were illegal under the National Labor Relations Act (NLRA) and thus could not be enforced. However, the Court stated the savings clause “offers no refuge for defenses that target arbitration either by name or by more subtle methods such as by interfering with fundamental attributes of arbitration” and such defenses do not prevent enforcement of arbitration agreements.
Next, the Court tackled the employees’ argument that the NLRA displaces the Arbitration Act and outlaws class action waivers. Specifically, they argued that Section 7 of the NLRA guarantees workers the right to “engage in concerted activities.” However, the Court rejected this argument and stated nothing in the NLRA, which does not even mention class or collective action procedures, expresses approval or disapproval of arbitration. The Court also surveyed its precedent and found no support for the position that the NLRA guarantees class and collective action procedures and thus the employees could not show a “clear and manifest” congressional intent to displace one Act with the another. Summarizing the employees’ argument, the Court stated: “And so they have cast in this direction, suggesting that one statute (the NLRA) steps in to dictate the procedures for claims under a different statute (the FLSA), and thereby overrides the commands of yet a third statute (the Arbitration Act). It’s a sort of interpretative triple bank shot, and just stating the theory is enough to raise a judicial eyebrow.”
Last, the employees argued that under the Court’s Chevron decision, the Court must give deference to an administrative agency’s interpretation of the law, and the National Labor Relations Board in 2012 suggested the NLRA displaces the Arbitration Act. However, the Court stated that unlike in Chevron, no unresolved ambiguities existed for which interpretation was needed.
The dissenting opinion stated the majority decision was “egregiously wrong,” and called for “congressional correction.”
Epic Systems Corp. v. Lewis, No. 16-285 (May 21, 2018)