Federal Arbitration Act and National Labor Relations Act - Arbitration and Collective Actions - Collective Arbitration Waivers - Epic Systems Corp. V. Lewis

Harvard Law Review, November 2018 | Go to article overview

Federal Arbitration Act and National Labor Relations Act - Arbitration and Collective Actions - Collective Arbitration Waivers - Epic Systems Corp. V. Lewis


The Supreme Court's decision last Term in Epic Systems Corp. v. Lewis (1) is a vivid illustration of the declining power of workers in the U.S. political system. The opinion, authored by Justice Gorsuch, upheld the validity of employment contracts in which employees give up their right to collective litigation against their employer. It is reminiscent of a once-infamous labor law decision from the late 1920s, the Red Jacket case, (2) in which Judge Parker of the Fourth Circuit protected the power of coal mine owners to forbid their workers from interacting with unions. (3) These two cases, situated ninety years apart, present a useful comparison for tracing changes in worker power. Both cases address contentious issues about workers' collective rights. They are similar, too, in terms of outcome and degree of engagement with on-the-ground labor issues. What is different is their political acceptability. In 1930, Judge Parker became the first Supreme Court nominee in decades to be rejected by the Senate, (4) largely because of his decision in Red Jacket. (5) Now, an opinion with a comparable outcome and analytical approach gets the support of a majority of the Court, without much of a reaction (so far) from Congress.

The legal question in Epic Systems involved a conflict between two federal statutes, the Federal Arbitration Act (6) (FAA) and the National Labor Relations Act (7) (NLRA). The FAA, enacted in 1925, provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (8) The Supreme Court has interpreted this provision to allow for the enforcement of arbitration agreements for claims arising from federal statutes. (9) There are exceptions, though. The FAA does not require enforcement of an agreement that waives a person's substantive rights guaranteed by another statute, (10) nor does it require arbitration of a statutory claim if the statute giving rise to that claim expresses a "contrary congressional command." (11) Predictably, a number of Supreme Court cases have examined whether various statutory claims can fit into these exceptions. (12) Epic Systems is the latest installment in this series. It focuses on Section 7 of the NLRA, which guarantees that "[e]mployees shall have the right to self-organization ... and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." (13) The specific question raised by Epic Systems is whether Section 7 of the NLRA gives workers a substantive right to collective litigation, such that arbitration agreements that waive that right are unenforceable under the FAA.

In January 2005, Stephen Morris started working as a junior accountant at Ernst & Young (EY). (14) About one year later, the company sent him an email with an attached arbitration agreement. (15) Two provisions of that agreement would become particularly relevant in later litigation. First, the agreement stated that all employee claims relating to federal and state wage statutes would be resolved via arbitration. Second, the agreement specified that claims by individual employees could not be consolidated. (16) According to the email, if Morris continued to work at EY, he would be bound by the agreement. (17) He continued working.

Several years later, after leaving his job, Morris filed a class action against EY in federal court for, among other claims, violations of the federal Fair Labor Standards Act. (18) The suit flatly contradicted the terms of his arbitration agreement: it was in court, and it combined the claims of several employees. Morris had an argument, however, for why the court should decline to enforce the arbitration agreement. A recent National Labor Relations Board (NLRB) decision, D.R. Horton, (19) had held Section 7 rights to be substantive and therefore unwaivable under the FAA. (20) Citing D.R. Horton, Morris argued that since the individualized arbitration clause of the arbitration agreement violated his Section 7 rights, the district court should refuse to enforce the agreement. …

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