Epic Shift: Supreme Court Enforces Class Action Waivers in Arbitration Agreements

Emery Gullickson Richards

The Supreme Court issued a landmark decision on May 21, 2018, which has widespread implications for all employers. In Epic Systems Corp. v. Lewis, a 5-4 opinion written by Justice Gorsuch, the Supreme Court held that arbitration agreements and class/collective action waivers are enforceable, putting to rest any argument that the National Labor Relations Act prevents or limits their enforceability. The decision provides employers further options for limiting litigation risk, particularly with respect to costly wage and hour collective actions. The decision also contains important implications for employers that maintain or are considering implementing arbitration agreements in the workplace, as there is no longer any identified legal impediment to the concept of an employer requiring its employees to waive the ability to bring a class or collective action under federal, state, and local employment laws.

The opinion resolves a circuit split on the enforceability of class action waivers in arbitration agreements, and repudiates the recent position of the National Labor Relations Board that these waivers were unenforceable. The decision addressed three consolidated cases: Epic Systems Corp. v. Lewis (Seventh Circuit), Ernst & Young LLP et al. v. Morris et al. (Ninth Circuit), and National Labor Relations Board v. Murphy Oil USA, Inc., et al. (Fifth Circuit). It marks a sea change for employers in jurisdictions where these waivers previously were not upheld, particularly within the Ninth Circuit, as well as the Sixth and Seventh Circuits. It reaffirms the position already adopted by courts within other jurisdictions, such as the Fifth Circuit, that class action waivers are enforceable. For employers whose operations span across different jurisdictions, the decision provides much needed clarity, consistency, and certainty, now allowing employers to rely on a universal arbitration agreement with a class action waiver in each state in which they operate without concerns about enforceability.

The decision may also carry potential implications for states responding to the #MeToo movement with legislation to restrict the arbitrability of claims of sexual harassment. The Epic Systems opinion commences with a question with great weight on this issue: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?” Slip op. at 1. The opinion responds with a resounding “yes,” noting later that debates over arbitration “remain hotly contested” in Congress. Slip op. at 24. Although the opinion does not discuss the Ending Forced Arbitration of Sexual Harassment Act, a current bill pending in Congress, the opinion contains repeated reiterations of the primacy of the Federal Arbitration Act. Arguments that the Federal Arbitration Act preempts, and therefore dooms, state laws restricting the enforceability of arbitration in cases alleging sexual harassment or sex discrimination may now draw added force from Epic Systems. We will continue to provide more detailed analysis of other potential implications of the Epic Systems ruling here on our blog, http://www.BlankRomeWorkplace.com.

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