Epic System Decision

The United State Supreme Court just made it easier for employers to compel its employees to arbitrate claims. On May 21, the Supreme Court issues its decision in Epic Systems Corp. v. Lewis, in which it held class action waivers in arbitration agreements between employers and employees do not violate the National Labor Relations Act and are thus legal. The opinion resolves a split among federal circuits, reaffirming the strong federal policy favoring arbitration.

Justice Gorsush wrote the Court’s opinion in this 5-4 decision. In doing so, the Supreme Court erased any doubt of its view on this issue. It stated the legal conclusion that such waivers are permissible is, in the words of the Supreme Court, “clear” and “unmistakable.” As Justice Gorsuch wrote, “[i]n the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.”

The FAA, generally, applies to an arbitration agreement—and preempts all state laws—when the economic activities of the parties have some nexus to interstate commerce. It is presently unknown how this decision will apply to the relatively smaller group of arbitration agreements that are not subject to the FAA remains to be seen.

It is debate that this decision abrogates last year’s decision of the New York State Appellate Division in Gold v. New York Life Ins. Co., 153 A.D.3d 218 (1st Dep’t 2017), which relied on the Seventh Circuit’s decision in Epic Systems—now reversed—to declare class and collective action waivers in arbitration agreements unenforceable under the NLRA.

This decision also raises questions about the enforceability of the rules the New York City’s Department of Consumer Affairs issued under the Freelance Isn’t Free Act, which state that “[i]f a contract [between a hiring party and a freelance worker] includes language that waives or limits a freelance worker’s right to participate in or receive money or any other relief from any class, collective, or representative proceeding, said waiver or limitation is void.” See N.Y.C. Rules, Tit. 6, § 12-05(b).

Justice Ginsberg (the Notorious RBG) wrote the opinion for the minority and scolded Justice Gorsuch the rest of the majority for turning a blind eye to the employer-employee power imbalance and that this decision could result in employees unwilling to step forward.

Like most Supreme Court rulings, the fully impact of this decision is not yet fully known. The scope and enforceability of arbitration agreements are always complex questions. It takes experienced employment lawyers to analyze this issue. The top employment lawyers at Lipsky Lowe can help.