Employment
attorney Curt Surls comments on a recent U.S. Supreme Court opinion issued in
Epic Systems Corp. v. Lewis
In his first article
in his series of instructional articles, Employment Lawyer Curt Surls reviews a
recent Supreme Court case that reverses NLRA precedent
U.S.
Supreme Court recently issued an opinion that reverses Obama era National Labor
Relations Board’s interpretation of the National Labor Relations Act
(hereinafter “NLRA”) that individualized arbitration provision in employment contracts
were not enforceable.
In Epic
Systems Corp. v. Lewis, the Supreme Court addressed whether employment contract
provision requiring individual arbitration between the employer and employee,
instead of collective or class action, is enforceable. In doing so, the opinion also decides two
other cases presenting substantially the same issue, Ernst & Young, LLP v.
Morris and National Labor Relations Board v. Murphy Oil USA, Inc. Ordinarily, Federal Arbitration Act requires
that courts recognize and enforce the parties’ arbitration agreement. The exception is where the agreement’s
provision violates another federal law. In
these cases, the employees argued that the individualized arbitration
requirement violates the NLRA.
Majority
opinion, written by Justice Gorsuch, noted that “[a]lthough the Arbitration Act
and the NLRA have long coexisted—they date from 1925 and 1935, respectively—
the suggestion they might conflict is something quite new. Until a couple of years ago, courts more or
less agreed that arbitration agreements like those before us must be enforced
according to their terms.” The Court
explained that “[i]n 2012, the Board— for the first time in the 77 years since
the NLRA’s adoption—asserted that the NLRA effectively nullifies the
Arbitration Act in cases like ours.”
Majority
opinion noted that the origin of the Federal Arbitration Act was from a perception,
perhaps justified, that courts were hostile to arbitration agreements and
regularly refused to recognize their validity.
Therefore, Congress passed the Arbitration Act that “establishes ‘a
liberal federal policy favoring arbitration agreements.’” Also, “[n]ot only did Congress require courts
to respect and enforce agreements to arbitrate; it also specifically directed
them to respect and enforce the parties’ chosen arbitration procedures.” Thus, “[o]n first blush, these emphatic
directions would seem to resolve any argument under the Arbitration Act. The
parties before us contracted for arbitration. They proceeded to specify the
rules that would govern their arbitrations, indicating their intention to use
individualized rather than class or collective action procedures. And this much
the Arbitration Act seems to protect pretty absolutely.”
Employees
sought to avoid individualized arbitration due to the Arbitration Act’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.’” Employees argued that
“illegality under the NLRA is a ‘ground’ that ‘exists at law . . . for the
revocation’ of their arbitration agreements, at least to the extent those
agreements prohibit class or collective action proceedings.
The Court
went on to explain that even if the employees’ argument could survive various issues
that may not be in their favor, the fundamental problem is that “the saving
clause recognizes only defenses that apply to ‘any’ contract. In this way the
clause establishes a sort of ‘equal-treatment’ rule for arbitration contracts.” In essence, “the saving clause does not save
defenses that target arbitration either by name or by more subtle methods, such
as by ‘interfer[ing] with fundamental attributes of arbitration.’”
The Court
also rejected the argument that in these circumstances, the NLRA displaces the
mandates of the Arbitration Act. “A
party seeking to suggest that two statutes cannot be harmonized, and that one
displaces the other, bears the heavy burden of showing ‘a clearly expressed
congressional intention’ that such a result should follow.” The employees failed to do so here. A hardly surprising result, explains the
Court, considering that “[t]he notion that Section 7 [of the NRLA] confers a
right to class or collective actions seems pretty unlikely when you recall that
procedures like that were hardly known when the NLRA was adopted in 1935.
Federal Rule of Civil Procedure 23 didn’t create the modern class action until
1966; class arbitration didn’t emerge until later still; and even the Fair
Labor Standards Act’s collective action provision postdated Section 7 by
years.”
Epic
Systems Corp. and related cases signals a return to pre-2012 era when
individualized arbitration provisions were enforced by the courts. Unless the law is amended by Congress,
employers will be able to contract with employees to foreclose collective or
class action when employment contract dispute arises. The case is Epic Systems Corp. v. Lewis, No.
16-285, decided May 21, 2018.
The full article will be published on the Blog of Mr. Surls
at https://CurtSurlsBlog.Blogspot.com
*** Curt Surls is a Specialist in the areas of Employment Discrimination, Sexual Harassment, and Wrongful Termination. Located in Manhattan Beach, California, the Law Office of Curt Surls offers a complete range of employment law services to those living throughout Southern California, including all of Los Angeles, Riverside, Orange and San Bernardino counties. With nearly 30 years of experience focusing almost exclusively on this area of law, attorney Curt Surls and his law firm provide the personalized assistance and effective support his clients need. References: Law Firm Website: https://www.curtsurlslaw.com/; Professional Profile on law firm website: https://www.curtsurlslaw.com/attorney-profile/; LinkedIn Profile: https://www.linkedin.com/in/curt-surls-83118b5/; Attorney Profile: https://solomonlawguild.com/curt-surls%2C-esq; Attorney News: https://attorneygazette.com/curt-surls%2C-esq#5282ef1c-68bd-44ca-a705-13c4c4d19d33
