Epic Systems and the Atomization of Employment Disputes

Millions of American workers are parties to arbitration agreements that require them to bring claims against their employers in individualized arbitration proceedings (rather than as part of a class or collective action, as authorized by some federal and state laws regulating the workplace). In Epic Systems v. Lewis, a 5:4 majority of the Supreme Court held today that these agreements must be enforced even though the federal National Labor Relations Act declares it an unfair labor practice for an employer to interfere with the ability of employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The decision is not unexpected, but it is consequential given the number of affected employees.

The case—really, several consolidated cases—was weird for a number of reasons. The NLRB had concluded that employers who insisted on individualized arbitration were engaged in unfair labor practices. Then, in September 2017, the Board fell under Republican control, and many wondered whether it would continue to defend that position. It did, but the administration worked hard to undermine it. In fact, the Solicitor General, which had previously supported the Board in seeking Supreme Court review, later filed a brief disagreeing with it on the merits.

As I said, the decision wasn’t unexpected, with Justice Gorsuch writing an opinion joined by Justices Roberts, Kennedy, Alito, and Thomas (who also wrote a separate concurrence). The most novel aspects of the case stemmed from the arguable conflict between the NLRA and the Federal Arbitration Act (FAA), which requires enforcement of arbitration agreements “save upon such grounds as exist at law or in equity for the revocation of any contract.” From prior cases, it was relatively clear that, but for the NLRA, these arbitration agreements would have to be enforced. On the other hand, the NLRA protects employees’ right to engage in “concerted activity,” and it’s no stretch to read that protection to extend to the right to participate in aggregate forms of litigation—say, to collect unpaid wages. The majority saw no conflict, essentially reading the NLRA to protect the right to engage in collective bargaining, but not collective litigation.

The text hardly compels that reading, but, as I said, it’s not much of a surprise. By thin majorities, the Supreme Court has consistently allowed businesses to use arbitration to defeat potential liability in class (or collective) action proceedings. We’ve talked about that trend here on Credit Slips before. So it’s hard to be surprised by today’s result.