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May 21, 2018

Supreme Court Decides Epic Systems Corp. v. Lewis

On May 21, 2018, the Supreme Court of the United States decided Epic Systems Corp. v. Lewis, No. 16-285, holding that the Federal Arbitration Act mandates the enforcement of arbitration agreements providing for individualized arbitration proceedings.

The facts of the three cases before the Court were the same for purposes of the decision. An employee-employer agreement contained a provision mandating individualized arbitration of any dispute that arises between the employee and the employer.

The Court found that the Arbitration Act requires court enforcement of agreements to arbitrate, including terms of arbitration selected by the parties. The law’s saving clause—allowing courts to refuse to enforce such agreements on grounds that “exist at law or in equity for the revocation of any contract”—only applied to generally acceptable contract defenses such as fraud, duress, or unconscionability.  Defenses targeting arbitration itself were not sufficient.

The Court also found that the National Labor Relations Act’s protection of “concerted activities” did not override the Arbitration Act because the Court was able to give effect to both laws and there was no manifest Congressional intent to displace one law with the other. The Court found that class and collective actions are different from the Labor Act’s protection of the right to organize unions and bargain collectively. The Labor Act’s 1935 adoption date also largely predated arbitration making it unlikely Congress thought of arbitration when it enacted the Labor Act. The Labor Act’s regulatory structure also did not mention adjudication of class or collective actions. 

The Court reasoned that Congress would not alter basic regulatory schemes such as the Arbitration Act’s dictates using vague terms or ancillary provisions. Although the plaintiffs’ claims came under the Fair Labor Standards Act, the plaintiffs never suggested that law displaced the Arbitration Act. A catchall provision in the Labor Act could not dictate dispute resolution procedures in federal court and arbitration proceedings when such matters are usually left to other bodies of law, such as the Federal Rules of Civil Procedure, the Arbitration Act, or the Federal Labor Standards Act. The Court also recognized that it has repeatedly rejected attempts to construe conflicts between the Arbitration Act and other federal laws.

The Court also rejected the employees’ invocation of Chevron deference under Chevron U.S.A. Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 (1984), under the National Labor Relations Board’s 2012 ruling that the Labor Act nullified the Arbitration Act. The Board’s decision did not interpret just the Labor Act—the law that it administers—but also the Arbitration Act, which the Board does not administer. The Solicitor General’s disagreement with the Board’s interpretation also undermined the Executive Branch’s ability to present a unified position to the Court.

Justice Gorsuch delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy, Thomas, and Alito joined. Justice Thomas filed a concurring opinion. Justice Ginsburg filed a dissenting opinion in which Justices Breyer, Sotomayor, and Kagan joined.

Download Opinion of the Court.

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