The Court rules that the National Labor Relations Act does not give employees a right to collective legal action, and that the FAA requires courts to enforce class, collective, and joint action bans in forced arbitration clauses contained in employment contracts.

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Epic Systems, Corp. v. Lewis, 138 S. Ct. 1612 (2018)
 

Relevant Facts: Three separate cases with similar facts were combined, all involving claims by workers for unpaid wages by more-powerful employers. In each instance, a group of employees’ efforts to band together to enforce their right to unpaid wages was met by their employer’s invocation of the class ban contained in their company forced arbitration provision to block the workers’ ability to proceed in a class legal action. The employees objected, arguing that the National Labor Relations Act (NLRA) protects their right to act collectively for their “mutual aid or protection.” The class ban in the company forced arbitration clause, the employees argued, violated that NLRA guarantee, so was unlawful and unenforceable.

 

Question Before The Court: Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a joint basis in any forum are illegal because they limit the employees’ right under the NLRA and NLGA to engage in “concerted activities” in pursuit of their “mutual aid or protection,” and are therefore illegal and unenforceable under the Federal Arbitration Act’s (FAA) “savings clause.”

 

The Opinion: The U.S. Supreme Court held that the FAA requires collective action bans in employment contracts to be enforced. In so finding, the Court determined that the NLRA did not apply in the case before it because, in its view, the NLRA was designed to serve as a mechanism for workers to organize a union in their workplace, but that workers’ right to act collectively for “mutual benefit or protection” does not extend to collective legal action. The Court reasoned that, since the NLRA didn’t protect a right to collective legal action, class bans in forced arbitration clauses limiting workers’ ability to band together against a more-powerful employer are not illegal, and, by extension, the FAA’s “savings clause” did not apply. It further asserted that even were the illegality defense available, it still could not be applied because doing so would impermissibly “disfavor arbitration”—an act the Court ruled in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) would violate the FAA. The Court then reiterated its position in Concepcion that courts cannot render arbitration contracts unenforceable for public policy reasons.

 

In reaching its holding, the majority expressed open disdain toward the employees’ effort to retain their right to band together. It portrayed the illegality defense asserted by the workers as an attempt to “attack the individualized nature of the arbitration proceedings,” and claimed that the employees’ demand to enforce their rights collectively was really intended to “interfere with one of arbitration’s fundamental attributes.” In making this point, the Court ignored the fact that the attributes it was holding up as sacrosanct had only been used to characterize arbitration proceedings for less than a decade and were wholly a product of the Court’s own recent decisions—observations that Justice Ruth Bader Ginsberg pointed out in her scathing dissent.

 

The full repercussions of this opinion have yet to be felt. Time will tell what this case will mean for workers who seek avail themselves of the “mutual aid or protection clause” of the NLRA in the future; and the winnowing of the FAA “savings clause” in this opinion creates doubt as to how an employee may use the provision to defend against forced arbitration moving forward.

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