Epic Systems Corp. v. Lewis
Whether employment arbitration agreements that require employees to resolve disputes individually — thereby waiving the right to participate in class or collective actions — are enforceable under the Federal Arbitration Act (FAA), or whether such agreements violate the National Labor Relations Act's (NLRA) guarantee of employees' rights to engage in 'concerted activities.'
The Decision
5-4 decision · Opinion by Neil Gorsuch · 2018
Majority Opinion— Neil Gorsuchconcurring ↓dissent ↓
In a 5–4 decision authored by Justice Neil Gorsuch, the Supreme Court ruled in favor of the employers, holding that arbitration agreements requiring individual proceedings — and waiving class or collective actions — are fully enforceable under the Federal Arbitration Act, even for disputes between employers and employees. The Court concluded that the NLRA does not override the FAA or render such agreements illegal.
Justice Gorsuch's majority opinion began with the FAA, emphasizing that Congress had enacted it precisely to ensure that arbitration agreements would be treated as valid and enforceable, reversing a longstanding judicial hostility toward arbitration. The FAA, Gorsuch wrote, leaves no room for courts to refuse enforcement of arbitration agreements based on a policy preference for class proceedings. The statute demands that courts 'rigorously enforce' arbitration agreements according to their terms.
Turning to the employees' argument that the NLRA created a conflicting federal right, Gorsuch rejected it. He interpreted the NLRA's protection of 'concerted activities' as focused on the core labor rights the statute was designed to address: organizing unions, engaging in collective bargaining, and striking. He found no evidence that Congress, when it passed the NLRA in 1935, intended to create a right to class action litigation — a procedural mechanism that developed separately and much later. The majority emphasized that when Congress wants to override the FAA, it knows how to say so explicitly, and the NLRA contains no such clear directive.
The majority also addressed the FAA's 'saving clause,' which allows arbitration agreements to be invalidated on generally applicable contract defenses like fraud or duress. Gorsuch reasoned that the employees' argument did not invoke a generally applicable contract defense but instead sought a rule that would apply only to arbitration agreements — exactly the kind of arbitration-specific obstacle the FAA was designed to prevent.
The practical implications of the decision were sweeping. By upholding these agreements, the Court effectively confirmed that employers across the country could lawfully require workers to give up the ability to join together in class or collective actions, channeling all disputes into one-on-one arbitration. The ruling cemented a powerful tool for employers and significantly limited the options available to workers seeking to challenge widespread workplace violations collectively.
Concurring Opinions
Justice Clarence Thomas wrote a concurring opinion joining the majority in full but writing separately to elaborate on his longstanding view that the FAA's saving clause in Section 2 should be read even more narrowly than the majority suggested — applying only to defenses that challenge the actual formation of the arbitration contract (such as fraud in the inducement), rather than defenses that challenge enforcement of an already-formed agreement.
Dissenting Opinions
Ruth Bader Ginsburgjoined by Stephen Breyer, Sonia Sotomayor, Elena Kagan
Justice Ginsburg wrote a forceful dissent — which she read aloud from the bench, a rare step signaling the depth of her disagreement — calling the majority's decision 'egregiously wrong.' She argued that the NLRA's protection of concerted activity plainly encompasses the right to bring collective legal claims and that the majority had ignored the historical purpose of the statute, which was enacted precisely to address the power imbalance between individual employees and their employers.
- The NLRA was passed during the Great Depression specifically to protect workers who, as individuals, had virtually no bargaining power against large employers. Collective legal action is a textbook example of 'concerted activities for mutual aid or protection,' and stripping that right fundamentally undermines the statute's purpose.
- The history of labor law shows that employers had long used individual 'yellow dog' contracts to prevent workers from acting together, and the NLRA was designed to outlaw exactly this kind of coerced waiver of collective rights — the majority's ruling effectively resurrects that discredited practice.
- As a practical matter, the decision will leave many workers with no effective remedy at all, because when individual claims involve relatively small sums — such as a few hundred dollars in unpaid overtime — no rational person will bear the cost of pursuing individual arbitration, allowing widespread employer violations to go unchallenged.
- The majority's cramped reading of 'concerted activities' is inconsistent with decades of NLRB rulings and federal court decisions recognizing that collective litigation falls within the NLRA's protections, and the Court improperly elevated the FAA — a procedural statute — over a substantive worker-protection law.
Background & Facts
This case actually consolidated three separate disputes that all raised the same fundamental question: Can employers require workers to sign away their right to band together in class action lawsuits or collective arbitrations? The three cases — Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and National Labor Relations Board v. Murphy Oil USA, Inc. — each involved employees who had signed arbitration agreements as a condition of their employment. These agreements required that any legal disputes with the employer be resolved through individual arbitration, meaning each worker had to go it alone rather than joining forces with coworkers in a class or collective proceeding.
In the lead case, Jacob Lewis was an employee of Epic Systems Corporation, a healthcare software company based in Wisconsin. Lewis believed that he and his fellow employees had been denied overtime pay they were owed under the Fair Labor Standards Act (FLSA). Rather than pursuing his claim individually through arbitration, Lewis filed a collective action lawsuit in federal court, seeking to represent himself and similarly situated coworkers. Epic Systems responded by pointing to the arbitration agreement Lewis had signed and asked the court to compel him to resolve his claims through individual arbitration instead.
The lower courts split sharply on the question. The Seventh Circuit Court of Appeals, hearing Lewis's case, ruled in his favor, holding that the arbitration agreement was unenforceable because it violated employees' rights under Section 7 of the NLRA — the provision that protects workers' ability to engage in 'concerted activities for the purpose of mutual aid or protection.' The Ninth Circuit reached the same conclusion in the Ernst & Young case. However, the Fifth Circuit went the other way in the Murphy Oil case, ruling that the FAA required enforcement of the arbitration agreements and that the NLRA did not override them.
This direct conflict among the federal appeals courts — known as a 'circuit split' — is one of the strongest reasons for the Supreme Court to step in, and it did. The stakes were enormous: tens of millions of American workers had signed similar arbitration agreements, and the outcome would determine whether those agreements could effectively prevent workers from collectively challenging workplace violations. The National Labor Relations Board itself had taken the position that these agreements were illegal, adding another layer of institutional conflict to the dispute.
The Arguments
The employers argued that the Federal Arbitration Act is crystal clear: courts must enforce arbitration agreements as written, including provisions that require disputes to be resolved individually. They contended that the NLRA's protection of 'concerted activities' was about union organizing and collective bargaining, not about the procedural right to file class action lawsuits.
- The FAA, enacted in 1925, establishes a strong national policy favoring enforcement of arbitration agreements, and courts have no authority to override them absent a clear congressional command in another statute.
- The NLRA's Section 7, which protects 'concerted activities for mutual aid or protection,' was historically understood to cover things like forming unions, going on strike, and bargaining collectively — not class action litigation procedures that didn't even exist in their modern form when the NLRA was enacted in 1935.
- There is no 'congressional command' in the NLRA that clearly and explicitly overrides the FAA, and courts should not manufacture a conflict between two federal statutes where Congress created none.
The employees argued that the NLRA gives workers a substantive right to act together — including by filing lawsuits collectively — and that arbitration agreements requiring individual proceedings illegally strip workers of this federally protected right. Because the NLRA makes such agreements unlawful, the FAA's 'saving clause' prevents their enforcement.
- Section 7 of the NLRA broadly protects 'concerted activities for the purpose of mutual aid or protection,' and filing a collective or class action lawsuit to vindicate shared workplace rights is plainly a form of concerted activity for mutual aid.
- The FAA's own Section 2 contains a 'saving clause' that says arbitration agreements can be invalidated on grounds that exist for any contract — and an agreement that requires workers to give up rights guaranteed by federal law is unenforceable.
- Without the ability to act collectively, many workers will have no realistic path to enforce their rights, because individual claims for small amounts of unpaid wages are often too costly to pursue alone, effectively immunizing employers from accountability.