On May 21, 2018, the Supreme Court settled the contentious class action waiver issue that has riled courts for the past six years. In a 5-4 opinion, the Court in Epic Systems Corporation v. Lewis, Supreme Court of the United States, Nos. 16–285, 16–300, 16–307 (May 21, 2018) upheld class action waivers in arbitration agreements. Relying heavily on the text of the Federal Arbitration Act (FAA) and “a congressional command requiring us to enforce, not override, the terms of the arbitration agreements before us,” the Court ruled that the FAA instructs “federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.” The Court also reasoned that neither the FAA’s savings clause nor the National Labor Relations Act (NLRA) contravenes this conclusion.
The Supreme Court’s Decision
After a thorough examination of the FAA and Section 7 of the NLRA, the Supreme Court concluded:
“. . . the law is clear: Congress has instructed that arbitration agreements must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the Arbitration Act.”
The Court considered but rejected the argument that the FAA’s savings 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” — creates an exception on the basis that the NLRA renders class and collective action waivers illegal. Relying on the Court’s 2011 AT&T Mobility LLC v. Concepcion decision, the Supreme Court determined instead that the savings clause permits courts to invalidate agreements on the basis of contract defenses such as fraud and duress but not on the basis of “defenses that apply only to arbitration.”
The Court also rejected the argument that class action waivers are invalid under Section 7 of the NLRA, explaining that:
“The notion that Section 7 confers a right to class or collective actions seems pretty unlikely when you recall that procedures like that were hardly known when the NLRA was adopted in 1935.”
There are many additional nuances to the Supreme Court’s decision, its effects on how employers should draft arbitration agreements, and the validity of the arbitration agreements currently in place. The Arizona employment lawyers at Faulkner Law Offices, PLLC have decades of experience in crafting arbitration agreements for employers as well as challenging arbitration improperly drafted arbitration agreements on behalf of employees.