U.S. Supreme Court Upholds Agreements Barring Employment Class Actions

Yesterday, the United States Supreme Court, in a 5-4 opinion, held that an employer and its employees may agree to arbitrate claims on an individual, not a class-wide basis. Epic Systems Corp. v Lewis, No. 16-285 (U.S. May 21, 2018). Writing for the majority, Justice Gorsuch rejects the National Labor Relations Board’s view – in opposition to “77 years of precedent” – that the National Labor Relations Act “effectively nullifies the Arbitration Act.” The majority rendered its opinion against the backdrop of “battling briefs about the law’s meaning” from the Solicitor General and the NLRB. When an employer and an employee voluntarily agree to individual, as opposed to class arbitration, “a congressional command requires [a Court] to enforce, not override, the terms of the arbitration agreement.” The majority finds that the NLRB’s protection of “concerted action” fell short of overriding the Arbitration Act’s imprimatur respecting the parties’ freedom to agree to individual adjudication of employment claims. Reciting previous precedent regarding Congressional intent, Justice Gorsuch professes doubt that Congress might “hide elephants in mouseholes” and “flatten the parties’ contracted-for dispute resolution procedures.”

The majority’s opinion represents a strong endorsement of the primacy of an arbitration agreement. The Court observes that “[i]n many cases over many years, this Court has heard and rejected efforts to conjure conflicts between the Arbitration Act and other federal statutes,” but the Court “has rejected every effort to date” to override the parties’ private agreement. Justice Gorsuch went out of his way to suggest that, even under Chevron, no deference was due to the NLRB, which – according to the Court – was “address[ing] the meaning of a . . . statute it does not administer.”

Justice Gorsuch’s opinion, probably his most significant to date, calls forth some historical jurisprudence, noting the dissent’s view that “today’s decision ushers us back to the Lochner era when this Court regularly overrode legislative policy judgments.” “Instead of overriding Congress’s policy judgements,” the decision – in the view of the majority – “seeks to honor them.” Ultimately, the decision of the Court defers to Congressional intent: “Because we can easily read Congress’ statutes to work in harmony, that is where our duty lies.”

Justice Ginsberg, who dissented that the “Court’s decision is egregiously wrong,” recites a long history of what she regards as an imbalance between employees and employers. Joined by Justices Breyer, Sotomayor, and Kagan, she advocates for a statutory interpretation that would provide employees – even in arbitration – with an access to class procedures for relief. The dissent would “hold that the employer-dictated collective-litigation stoppers, i.e., ‘waivers,’ are unlawful.”

This close decision brings to rest a long-running conflict in the courts concerning whether employers can require, as a condition of employment, employees to relinquish their ability to assert class claims in favor of arbitration. If Congress chooses to change the decision it can, but for now employers have a green light to insist on individual adjudication of claims notwithstanding Section 7 of the NLRA.