May 30, 2018 Practice Points

An Epic Decision

By Debra Fischman, James M. Garner, and Jeffrey D. Kessler

Employers scored an important victory on May 21, 2018, when the U.S. Supreme Court upheld the legality of arbitration agreements that require workers to relinquish the right to bring class-action claims on various disputes, primarily over wages and hours. Epic Systems Corp. v. Lewis, No. 16-285, ___ U.S. ___ (2018).

Epic involved putative collective and class actions brought on behalf of employees alleging that their employer violated the Fair Labor Standards Act (FLSA) and the state laws of Wisconsin and California by misclassifying them and thereby depriving them of overtime pay. The employer successfully moved to compel individual arbitration and to dismiss the actions. In a 5–4 ruling, the Court rejected the employees' argument that requiring them to arbitrate their claims individually ran afoul of the National Labor Relations Act (NLRA), part of which guarantees employees "the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." 29 U.S.C. § 157.

As an initial matter, the Court noted that the NLRA and the Federal Arbitration Act (FAA) have long coexisted. Further, the FLSA, not the NLRA, addresses the type of collective and class actions the employees sought to bring, but the employees in this case did not argue that the FLSA displaces the Arbitration Act, presumably because the Court has long held that an identical collective action scheme does not prohibit individualized arbitration proceedings. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32, 111 S. Ct. 1647 (1991) (discussing Age Discrimination in Employment Act). The Court rejected the notion that a single provision of the NLRA, which addresses union organization and collective bargaining, could serve to displace dispute resolution procedures in federal courts or arbitration proceedings, including procedures set forth in the Federal Rules of Civil Procedure, the FAA, and the FLSA. The Court found that neither the language, structure nor purpose of the NLRA conflicts with enforcement of agreements to individualized arbitration in these cases. More broadly, the Court reaffirmed the principle that the FAA requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select. 9 U.S.C. §§ 2, 3, 4.

The Epic ruling is noteworthy in that although it arises in the context of a wage claim, it could be found to apply more broadly to discrimination claims. Growing numbers of employers that have been alarmed by a recent rise in class-action claims brought by workers on wage issues and sexual harassment issues find solace in the right to require employees to sign agreements requiring that any claim be submitted to arbitration. The class action and collective action mechanism (by which an individual or individuals are allowed under certain circumstances to sue on behalf of a larger class of individuals) often empower employees to file claims that they would not pursue if required to do so individually, and can result in large damages awards by juries. The Epic Court was not persuaded by the employees' reliance on the NLRA general counsel's opinion in 2012 suggesting that the NLRA displaces the FAA, and the principle that deference is owed to an agency's interpretation of the law. The Court noted that just two years prior to the 2012 opinion, in 2010, the general counsel for the NLRA opined that the the NLRA and the FAA coexist peaceably. Absent Congressional action, the Court refused to defer to the most recent agency interpretation that would use one statute to limit the work of a second statute. The Epic Court held that until Congress says otherwise, employers can enforce arbitration agreements that require employees to bringing individualized claims and may do so without fear of violating the NLRA.

Debra Fischman and Jeffrey D. Kessler are members, and James M. Garner is a co-managing member at Sher Garner Cahill Richter Klein & Hilbert LLC in New Orleans, Louisiana.

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