{"id":11018,"date":"2026-06-22T20:40:06","date_gmt":"2026-06-22T20:40:06","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/epic-systems-corp-v-lewis\/"},"modified":"2026-06-22T20:40:06","modified_gmt":"2026-06-22T20:40:06","slug":"epic-systems-corp-v-lewis","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/epic-systems-corp-v-lewis\/","title":{"rendered":"Epic Systems Corp. v. Lewis"},"content":{"rendered":"\n
\n SUMMARY<\/strong>
In the consolidated cases of Epic Systems Corp.<\/em> v. Lewis, Ernst & Young LLP<\/em> v. Morris<\/em>, and National Labor Relations Board <\/em>v. Murphy Oil USA, Inc.<\/em>,1<\/sup> the U.S. Supreme Court held on Monday that arbitration agreements in which an employee agrees to arbitrate any claims against an employer on an individual\u2014rather than on a class or collective\u2014basis, are enforceable and do not violate the National Labor Relations Act (\u201cNLRA\u201d).\u00a0 In reaching its decision, the Court held that Congress, through the Federal Arbitration Act (\u201cFAA\u201d), \u201chas instructed federal courts to enforce arbitration agreements according to their terms\u2014including terms providing for individualized proceedings,\u201d and that nothing in the NLRA overcame this principle.2<\/sup>\u00a0 The decision resolves a conflict in the courts of appeals and provides clarity to employers that have entered into arbitration agreements with employees that contain class- or collective-action waivers.\u00a0 The decision may lead to more employers considering the use of such agreements.<\/p>\n

PROCEEDINGS BELOW<\/strong>
In 2012, the National Labor Relations Board (\u201cNLRB\u201d) issued its decision in D.R. Horton, Inc.<\/em>, 357 N.L.R.B. 2277 (2012), finding for the first time that individual employment arbitration agreements run afoul of the NLRA, and that the NLRA overcomes the FAA.\u00a0 A split then developed among the federal courts of appeals\u2014some of which adopted the NLRB\u2019s new position that class- and collective-action waivers in employment agreements are unlawful, while others maintained that they are valid.\u00a0 Compare Murphy Oil USA, Inc.<\/em> v. NLRB<\/em>, 808 F.3d 1013, 1016 (5th Cir. 2015) (upholding class- and collective-action waivers in employment arbitration agreements), with Lewis <\/em>v. Epic Sys. Corp.<\/em>, 823 F.3d 1147, 1151, 1155 (7th Cir. 2016) (NLRA rendered class and collective action waivers in employment arbitration agreements unenforceable) and Morris <\/em>v. Ernst & Young, LLP<\/em>, 834 F.3d 975, 983 (9th Cir. 2016) (same).<\/p>\n

The Supreme Court granted certiorari <\/em>and consolidated three cases to resolve the split.\u00a0 The litigation had an unusual element in that lawyers for the federal government appeared on both sides.\u00a0 During the Obama administration, the Department of Justice filed a brief supporting the employees, but reversed course under the Trump administration and argued on behalf of the employers.\u00a0 The NLRB\u2019s general counsel argued for the employees.<\/p>\n

THE SUPREME COURT’S DECISION<\/strong>
In a 5-4 decision for the Court authored by Justice Gorsuch, the Supreme Court held that \u201cCongress has instructed that arbitration agreements . . . must be enforced as written\u201d and that class- and collective-action waivers in employment arbitration agreements are permissible under the NLRA.3<\/sup><\/p>\n

The Court began by reviewing the FAA\u2019s \u201cliberal federal policy favoring arbitration agreements\u201d and the requirement that courts \u201crigorously\u00a0.\u00a0.\u00a0.\u00a0enforce arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which that arbitration will be conducted.\u201d\u00a0 It explained that the FAA \u201cspecifically direct[s] [courts] to respect and enforce the parties\u2019 chosen arbitration procedures.\u201d4<\/sup><\/p>\n

The Court then rejected each of the arguments raised by the NLRB and the individual employees.\u00a0 First<\/em>, the Court held that the FAA\u2019s \u201csaving clause\u201d\u2014which provides that arbitration agreements are presumptively enforceable \u201csave upon such grounds as exist at law or in equity for the revocation of any contract\u201d\u2014does not \u201coffer[]\u00a0.\u00a0.\u00a0.\u00a0refuge for defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.\u201d\u00a0 In other words, because this argument specifically singled out \u201cindividualized arbitration proceedings\u201d as invalid, the \u201csaving clause\u201d was not implicated, and there was no \u201cgenerally applicable contract defense[]\u201d to overcome the presumption of enforceability.5<\/sup><\/p>\n

Second<\/em>, the Court rejected the argument that the NLRA and the FAA conflict and that, because the NLRA (1935) was enacted after the FAA (1925), it should control.\u00a0 The NLRB and the individual employees argued that the NLRA constituted a \u201cclear and manifest congressional command to displace the [FAA].\u201d\u00a0 The Court disagreed, stating that it is not at \u201cliberty to pick and choose among congressional enactments\u201d and must \u201cstrive \u2018to give effect to both.\u2019\u201d\u00a0 It further explained that there is a \u201c\u2018strong presumption\u2019 that repeals by implication are \u2018disfavored\u2019 and that \u2018Congress will specifically address\u2019 preexisting law when it wishes to suspend its normal operations in a later statute.\u201d\u00a0 Section 7 of the NLRA, for example, focuses on the right to organize unions and bargain collectively, and so \u201cdoes not even hint at a wish to displace the Arbitration Act.\u201d\u00a0 Accordingly, the Court found that \u201cthe absence of any specific statutory discussion of arbitration or class actions is an important and telling clue that Congress has not displaced the Arbitration Act.\u201d\u00a0 As stated by the majority, \u201cCongress \u2018does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions\u2014it does not, one might say, hide elephants in mouseholes.\u2019\u201d6<\/sup><\/p>\n

Finally<\/em>, the Court declined to give Chevron <\/em>deference to the NLRB\u2019s interpretation of the NLRA in D.R. Horton, Inc.<\/em>\u00a0 The Court observed that D.R. Horton, Inc.<\/em> was an outlier in Board precedent, as it \u201cfor the first time in the 77 years since the NLRA\u2019s adoption [] asserted that the NLRA effectively nullifies the Arbitration Act in cases like ours.\u201d\u00a0 The Court also reasoned that the NLRB \u201csought to interpret [the NLRA] in a way that limits the work of a second statute, the Arbitration Act,\u201d and that, although Chevron <\/em>deference is premised in part on the notion that \u201c\u2018policy choices\u2019 should be left to the Executive Branch,\u201d \u201chere the Executive seems to be of two minds, for we have received competing briefs from the [NLRB] and the United States (through the Solicitor General).\u201d\u00a0 The Court noted that none of the parties challenged the doctrine of deference to administrative determinations established in Chevron<\/em>, but that the NLRB\u2019s interpretation of the FAA was not entitled to such deference in any event.7<\/sup><\/p>\n

Justice Thomas concurred in the majority opinion, but wrote separately to add that the FAA\u2019s saving clause means that the only grounds for revoking an arbitration contract are \u201cthose that concern the formation of the arbitration agreement,\u201d such as fraud or adhesion.\u00a0 The employees\u2019 argument that the arbitration agreements are unenforceable under the NLRA is a public-policy defense, not an argument that \u201cconcern[s] the formation of the arbitration agreement.\u201d8<\/sup><\/p>\n

Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented, arguing that the Court paid \u201cscant heed\u201d to NLRB precedent that \u201cthe NLRA safeguards employees from employer interference when they pursue joint, collective, and class suits related to the terms and conditions of their employment.\u201d\u00a0 She opined that the number of suits brought by employees is likely to decrease in light of the decision based on the \u201c[e]xpenses entailed in mounting individual claims\u00a0.\u00a0.\u00a0.\u00a0far outweigh[ing] potential recoveries,\u201d \u201c[f]ear of retaliation,\u201d and \u201cthe slim relief obtainable\u201d in individual suits.\u00a0 She argued that, as a result of the Court\u2019s decision, \u201cemployers, aware that employees will be disinclined to pursue small-value claims when confined to proceeding one-by-one, will no doubt perceive that the cost-benefit balance of underpaying workers tips heavily in favor of skirting legal obligations.\u201d9<\/sup>\u00a0 The majority, responding to this argument, noted that \u201cthe dissent retreats to policy arguments.\u201d10<\/sup>\u00a0 Justice Ginsburg further stated that \u201c[c]ongressional correction\u201d of the court\u2019s decision is \u201curgently in order.\u201d11<\/sup><\/p>\n

IMPLICATIONS<\/strong>
The decision provides employers and employees guidance regarding the legality of class- and collective-action waivers in their employment documents and policies.<\/p>\n

On Monday, the NLRB issued a statement saying that it \u201crespects the Court\u2019s decision, which clearly establishes that arbitration agreements providing for individualized proceedings, and waiving the right to participate in class or collective actions, are lawful and enforceable.\u201d\u00a0 The NLRB also stated that it currently has 55 pending cases with allegations that employers violated the NLRA because their arbitration agreements contained class waivers, adding that it is “committed to expeditiously resolving these cases in accordance with the Supreme Court\u2019s decision.\u201d12<\/sup><\/p>\n

In addition, employers currently facing class or collective actions in federal or state courts may be able to compel individual arbitrations if the employees previously entered into agreements waiving their rights to participate in class or collective actions.<\/p>\n

The decision also has effects in state and local jurisdictions.\u00a0 For example, in July 2017, the New York Appellate Division for the First Department held that \u201carbitration provisions . . . , which prohibit class, collective, or representative claims, violate the National Labor Relations Act (NLRA) and thus, that those provisions are unenforceable.\u201d13<\/sup>\u00a0 That decision will no longer be controlling law.<\/p>\n

Nonetheless, it is not possible to predict how Congress will react to the Court\u2019s opinion.\u00a0 In December 2017, for example, Senators Lindsey Graham (R\u2013S.C.) and Kirsten Gillibrand (D\u2013N.Y.) introduced a bill that would prohibit clauses in employment agreements requiring mandatory arbitration to resolve claims of sexual harassment or other discrimination.\u00a0 Because the Court\u2019s decision rested on statutory, rather than Constitutional grounds, Congress could effectively reverse the Court\u2019s decision by enacting new legislation.\u00a0 This is what happened after the Supreme Court decided Ledbetter <\/em>v. Goodyear Tire & Rubber Co.<\/em>, 550 U.S. 618 (2007), which held that the statute of limitations for presenting equal-pay discrimination claims began on the date the employer first made an illegal payment decision, not on the date of the last paycheck.<\/p>\n

The decision may also signal a narrowing of the Supreme Court\u2019s interpretation of Section 7 of the NLRA.\u00a0 The Court explained that \u201cSection 7 focuses on the right to organize unions and bargain collectively,\u201d and that its protection of \u201cother concerted activities\u201d should be read as referring to activities that are \u201clike the terms that precede it.\u201d\u00a0 In other words, Section 7 serves \u201cto protect things employees \u2018just do\u2019 for themselves in the course of exercising their right to free association in the workplace, rather than \u2018the highly regulated, courtroom-bound activities of class and joint litigation.\u2019\u201d\u00a0 The majority concluded by criticizing the dissent for \u201cimpos[ing] a vast construction on Section 7\u2019s language.\u201d14<\/sup> <\/p>\n

    \n
  1. Epic Sys. Corp.<\/em> v. Lewis<\/em>, 584 U.S. __, No. 16-285 (May 21, 2018).<\/li>\n
  2. Epic Sys. Corp.<\/em>, slip op. at 2.<\/li>\n
  3. Id.<\/em> at 25.<\/li>\n
  4. Id.<\/em> at 5 (citations and quotations omitted).<\/li>\n
  5. Id.<\/em> at 5-8 (citations and quotations omitted).<\/li>\n
  6. Id.<\/em> at 4, 9-19 (citations and quotations omitted).<\/li>\n
  7. Id.<\/em> at 19-21 (citations and quotations omitted).<\/li>\n
  8. Id.<\/em> at 1-2 (Thomas, J., concurring).<\/li>\n
  9. Id.<\/em> at 2, 10-11, 27-28 (Ginsburg, J., dissenting).<\/li>\n
  10. Epic Sys. Corp.<\/em>, slip op. at 24.<\/li>\n
  11. Id.<\/em> at 2 (Ginsburg, J., dissenting).<\/li>\n
  12. Supreme Court Issues Decision in NLRB v. Murphy Oil USA<\/em>, NLRB (May 21, 2018).<\/li>\n
  13. Gold <\/em>v. N.Y. Life Ins. Co.<\/em>, 153 A.D.3d 216, 221 (N.Y. 1st Dep\u2019t 2017).<\/li>\n
  14. Epic Sys. Corp.<\/em>, slip op. at 12, 23.<\/li>\n<\/ol><\/div>\n","protected":false},"excerpt":{"rendered":"

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