Supreme Court Doubles Down on Employment Arbitration

In a sharply divided 5-4 decision, the United States Supreme Court handed employers a major victory, upholding their ability to block all class-based litigation through the use of employment arbitration agreements.

In Epic Systems Corp v. Lewis, — U.S. –, No. 16-285 (May 21, 2018), Justice Gorsuch, writing for the majority, dealt a rebuke to the National Labor Relations Board (NLRB) which had attempted to block enforcement of arbitration agreements which restricted the ability to bring class or collective claims.  The Court held that “as a matter of law the answer is clear.  In the Federal Arbitration Act [FAA], Congress has instructed federal courts to enforce arbitration agreements according to their terms – including terms providing for individualized proceedings.”  The NLRB had argued that the right to “concerted activity” under the National Labor Relations Act (“NLRA”) prevented employers from using arbitration provisions that required workers to bring their claims on an individual basis.  In rejecting such a broad reading of the NLRA, the majority found that the plain language of the NLRA was far more limited, designed to protect the right to unionize and engage in collective bargaining. 

The Gorsuch majority rejected the argument that the NLRA’s protection of employee “collective action” overrides the FAA’s mandate to enforce arbitration agreements between private parties.  The Court concluded that the two statutory schemes do not conflict, but can, instead, be harmonized.  Section 7 of the NLRA, which provides for the right “to engage in other concerted activities for the purposes of collective bargaining or other mutual aid or protection,” does not address arbitration, and certainly fails to evidence “a clearly expressed congressional intention” to override the FAA.   The Court noted that, while union organization and collective bargaining are the province of the NLRB, dispute resolution procedures are instead the province of the federal courts and the FAA.

On a more technical note, the Court also held that the NLRB’s interpretation of Section 7 of the NLRA was not due any weight under the so-called Chevron deference doctrine.  Returning to a theme which he has often explored, Justice Gorsuch refused to defer to an administrative agency’s interpretations of its own regulations, signaling a growing willingness to police overzealous and politicized agency rulemaking.  Justice Gorsuch noted that although the FAA and NLRA have been in effect since 1925 and 1935, respectively, the idea that they conflict – specifically, the idea that the NLRA effectively nullifies the FAA in cases of employee class claims – was only adopted by the NLRB in 2012, and was not adopted by any federal Court of Appeals until 2016.  More so than the late Justice Scalia, whose seat he now fills, Justice Gorsuch seems eager to roll back the power of administrative agencies and regulatory interpretations that shift with the political winds of each change of administration.

The Court’s most recent ruling on employment arbitration caps almost three decades of pro-arbitration decisions.  With over half of the nation’s non-union workforce already subject to mandatory employment arbitration provisions, the promise of eliminating all risk of class-based litigation may be the final push needed for those employers remaining on the sidelines to jump on the employment arbitration bandwagon.  The Labor and Employment team at Eckert Seamans has decades of experience drafting and enforcing employment arbitration provisions and litigating employment arbitration claims and stands ready to assist if you would like further advice in this area.

This Labor & Employment Alert is intended to keep readers current on matters affecting labor & employment, and is not intended to be legal advice. If you have any questions, please contact Michael D. Jones at 215.851.8461 (mdjones@eckertseamans.com), or Rachel E. King at 215.851.6623 (rking@eckertseamans.com) or any other attorney with whom you have been working.

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Authors

Michael D. Jones

Member - Philadelphia

Rachel E. King

Associate - Philadelphia