United States: Supreme Court Upholds Class Waivers In Employment Arbitration Agreements

In Epic Systems Corp. v. Lewis, the US Supreme Court ruled in a 5-4 decision on May 21 that arbitration agreements with class and collective action waivers required as a condition of employment are enforceable under the Federal Arbitration Act, and nothing in the National Labor Relations Act (NLRA) overrides that result. This decision resolves a circuit court split and addresses a key concern for employers that has lingered since the National Labor Relations Board decided in 2012 that the NLRA prohibited such waivers. The decision clears a potential obstacle to enforcement of arbitration agreements with class and collective action waivers, and provides employers with another opportunity to consider whether an arbitration program is right for their organization.

The Court Continues to Enforce Arbitration Agreements in Accordance with Their Terms

The Court's opinion in Epic Systems Corp. v. Lewis—written by Justice Neil Gorsuch, with Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito joining in full—started by reviewing the origins of the Federal Arbitration Act (FAA) and the strong federal policy favoring arbitration that requires courts to enforce arbitration agreements in accordance with their terms. The Court noted that the FAA "also specifically directed [courts] to respect and enforce the parties' chosen arbitration procedures."

The Court rejected challenges to the arbitration agreements with class and collective action waivers under 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." The employees argued that the NLRA rendered these agreements "illegal," and that such illegality was grounds for revocation of the arbitration agreements. The Court ruled, however, that the "savings clause recognizes only defenses that apply to 'any' contract," such as "fraud, duress or unconscionability." The Court held that the employees' argument regarding illegality was not a defense to "any" contract, but one directed only to arbitration agreements, i.e., agreements that require individual arbitration instead of class or collective arbitrations. "And by attacking (only) the individualized nature of the arbitration proceedings, the employees' argument seeks to interfere with one of arbitration's fundamental attributes," that is, "the traditionally individualized and informal nature of arbitration."

The Court relied on the rationale in AT&T Mobility LLC v. Concepcion that a defense such as unconscionability, although a generally applicable contract defense, "failed to qualify for protection under the saving clause because it interfered with a fundamental attribute of arbitration all the same." The Court extended that rationale of Concepcion to the illegality defense proffered by the employees. "Illegality, like unconscionability, may be a traditional, generally applicable contract defense in many cases, including arbitration cases. But an argument that a contract is unenforceable just because it requires bilateral arbitration is a different creature." As such, the Court held that the FAA required the enforcement of arbitration agreements with class and collective action waivers required as a condition of employment.

The Court then addressed whether the NLRA overrides the FAA to invalidate such agreements, and concluded that it does not. The Court was guided by the principle that it must attempt to give effect to both statutes, and a party claiming that the statutes cannot be harmonized "bears the heavy burden of showing "'a clearly expressed congressional intention'" that such a result should follow." The Court held that NLRA "Section 7 focuses on the right to organize unions and bargain collectively," but "it does not express approval or disapproval of arbitration," "does not mention class or collective action procedures," and "does not even hint at a wish to displace the Arbitration Act—let alone accomplish that much clearly and manifestly, as our precedents demand."

The Court also refused to accord the National Labor Relations Board's (NLRB's) interpretation Chevron deference. Although no party requested that the Court reconsider Chevron deference, the Court identified several reasons not to accord such deference here, including that the NLRB had no authority to interpret the FAA, the Executive branch (the NLRB and Solicitor General) submitted briefs with conflicting interpretations of the NLRA, and the case could be resolved using traditional canons of statutory construction without resort to agency deference.

Justice Thomas authored a short concurring opinion to reiterate his view that the plain language of the FAA controls this result because the savings clause is limited to contract formation defenses, and the NLRA argument based on illegality does not pertain to such a defense.

Justice Ruth Bader Ginsburg dissented, joined by Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan, characterizing the majority opinion as "egregiously wrong," and arguing that NLRA Section 7 protects the right to pursue collective litigation over wage and hours, and that employer-dictated class and collective action waivers are unlawful. Justice Ginsburg called for legislative action to reverse the Court's decision: "Congressional correction of the Court's elevation of the FAA over workers' rights to act in concert is urgently in order."

Practical Considerations

The decision in Epic Systems continues the Court's strong commitment to enforcing arbitration agreements in accordance with their terms under the FAA. The Court's opinion makes clear that such agreements may include class and collective action waivers and may be a condition of employment. The Court's decision does not require that the agreement provide the option of an opt-out. The decision also permits an arbitration agreement that requires separate proceedings for each employee's claims.

Further, the decision provides support for arguments that state law efforts to curtail arbitration are preempted by the FAA, because such efforts conflict with the arbitration agreement's terms, do not apply to "any" contract, or interfere with a fundamental attribute of arbitration.

Please join Morgan Lewis on June 1, 2018, at 12:30 pm EDT, 9:30 am PDT, for a webinar that examines drafting, implementing, and enforcing arbitration agreements in the wake of Epic Systems. Register here.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions