Epic Systems Corp v. Lewis (SCt. Case No. 16-285) highlights the tension between a pair of federal laws, The National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA), concerning whether an employment contract can legally bar employees from engaging in collective action to enforce their rights in court. The Federal Arbitration Act (“FAA”) was enacted in 1925 to allow parties to contractually agree to resolve disputes through arbitration, rather than through the judicial system. The following decade Congress enacted The National Labor Relations Act of 1935 (“NLRA”), which protects the rights of employees to, among other things, engage in collective action to protect their legal rights. Employees protected under the NLRA are able to join together and take collective action to counter unfair employment practices and improve their working conditions and wages.
In Epic Systems, the employer distributed via email a new policy requiring employees to sign an arbitration agreement. The agreement, in short, stated that employees bringing claims for alleged violations of wage-and-hour or other laws could only do so through individual arbitration. This agreement further included a provision designed to waive the employees’ “rights to participate in any class, collective, or representative proceeding.” The agreement was to be recognized and signed by its employees, including Lewis, a tech writer for the company. Lewis did acknowledge and sign the agreement.
The following year, in February of 2015, Lewis filed a suit against Epic Systems. The suit was filed as a purported collective action, involving other tech writers employed at Epic Systems. The collective action alleged Epic Systems failed to follow The Fair Labor Standards Act of 1938, in addition to a Wisconsin law related to employees’ rights to receive overtime pay. The suit was filed in the United States District Court for the Western District of Wisconsin. Epic Systems moved to dismiss the suit, arguing that the arbitration agreement signed by Lewis prevented him from bringing or participating in collective actions, and required him to address any claims through individual arbitration. The District Court denied Epic Systems’ motion, finding Lewis’ action was protected under section 7 of the NLRA, and stating that the 2014 arbitration agreement and collective action waiver violated those terms.
Epic Systems appealed the District Court’s decision to the Court of Appeals for the Seventh Circuit, arguing the District Court erred by finding that the FAA did not control and that the collective action waiver was not valid. The Seventh Circuit agreed with the District Court, however, finding that Epic Systems’ collective action waiver violated the terms of the NLRA. Epic Systems petitioned to the Supreme Court of the United States for a writ of certiorari, following a split of authority among the circuit courts of appeal relating to the tension between respective provisions of the NLRA and FAA. In January 2017, the Supreme Court consolidated Epic Systems with two other similar cases and agreed to hear the oral arguments of all three cases.
On May 21, 2018, the Supreme Court issued a 5-4 decision ruling that individual arbitration agreements and collective action waivers are enforceable under the FAA, and that neither the NLRA or the FAA’s savings clause requires a different conclusion.
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