SCOTUS finally delivered its decision today in Epic Systems Corp. v. Lewis, the consolidated case that addresses whether employers can require employees to give up their right to class or consolidated litigation as part of an arbitration agreement. In a 5-4 decision authored by Justice Gorsuch, the Court found that class action waivers are enforceable under the FAA, and nothing in the labor laws preclude that conclusion.
As usual, how the Court frames the question gives away its answer. Justice Gorsuch began the majority opinion by asking: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?”* In contrast, Justice Ginsburg’s dissent frames the issue as “Does the [FAA] permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations Act . . . ‘to engage in . . . concerted activities’ for their ‘mutual aid or protection'”?
The majority opinion started by painting the NLRB’s opposition to class action waivers as a sudden shift after 77 years of peaceful coexistence with the FAA. It then finds that the NLRA cannot be applied via the savings clause of Section 2 of the FAA because it interferes with one of arbitration’s fundamental attributes — individual resolution — and therefore is not the type of defense that applies to any contract. (It cites Concepcion for the proposition that individual resolution is fundamental to arbitration.)
After finding nothing in the FAA itself that would prevent enforcement of the class action waivers at issue, the majority opinion looks to see if the NLRA clearly and manifestly indicates that Congress intended to override the FAA. It finds no statutory or contextual evidence of that clear intent. It also made short work of the employees’ argument for Chevron deference to the NLRB. [One of the best lines from the opinion is in that section. Noting that Chevron was based, in part, on the idea that policy choices should be left to the executive branch which voters can hold accountable, the majority writes: “whatever argument might be mustered for deferring to the Executive on grounds of political accountability, surely it becomes a garble when the Executive speaks from both sides of its mouth, articulating no single position on which it might be held accountable.”]
Interestingly, the majority decision acknowledges that there is a vigorous policy debate over the merits of class action waivers in arbitration. At multiple points during the opinion Justice Gorsuch bows to the possibility that the FAA could be flawed: “You might wonder if the balance Congress struck in 1925 between arbitration and litigation should be revisited in light of more contemporary developments.” And later “This Court is not free to substitute its preferred economic policies for those chosen by the people’s representatives.” But each time he returns to the idea that the Court is bound by the law to rigidly enforce arbitration agreements. In her dissent, Justice Ginsburg agrees that Congress is now the right branch of government to act. The dissent states: “Congressional correction of the Court’s elevation of the FAA over workers’ rights to act in concert is urgently in order.”
The dissent would hold that Section 7 of the NLRA does guarantee the right to pursue collective litigation and trumps the FAA. The dissent reviews the text and legislative history of the NLRA to support its conclusion and addresses the majority’s arguments. What I found most interesting in the dissent, however, was its review of the legislative history behind Section 1 of the FAA. Apparently, organized labor was concerned about the FAA’s impact, and Herbert Hoover amended the legislation to specifically exclude workers’ contracts. Congress passed the amended version and labor withdrew its opposition. [Justice Ginsburg’s research on that topic may come in handy next term when the Court addresses the New Prime case.]
This is the result that everyone expected based on oral argument and the current politics of the court. But still, when I read the “Justice Gorsuch delivered the opinion of the Court,” I can’t help feeling like it should say “Justice Gorsuch delivered on President Trump’s promises of a conservative court.” Would it have been better to just let the new appointments to the NLRB reverse the Board’s course of action, much like the reversals of other agencies, and save the Court from this particular insertion into politics?
* (Do you hear that growly “one on one” from this song when you read that? Maybe it’s just me.)