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Epic Systems Corp. v. Lewis: Class Action Waivers—Employees Predictably Lose

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06 Jun 2018
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June 6, 2018

Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018) (Gorsuch, J.).
Response by Michael Selmi
Geo. Wash. L. Rev. On the Docket (Oct. Term 2017)
Slip Opinion | SCOTUSblog

Epic Systems Corp. v. Lewis: Class Action Waivers—Employees Predictably Lose

It came as no surprise when the Supreme Court, in a 5–4 decision, upheld the permissibility of class action waivers that are included in employment agreements. After all, the trio of cases, with Epic Systems Corp. v. Lewis1 as the lead case, presented an irresistible trifecta for the conservative wing of the Court: its love of arbitration, disdain for class actions, and lack of sympathy for employees all combined to dictate the result. What was somewhat surprising was the stridency of the majority and dissenting opinions, both of which could have been uploaded straight from one of the many advocates’ briefs. Justice Gorsuch’s breezy majority opinion swept grandly and displayed little fidelity to past precedent, while Justice Ginsburg’s dissent read like an AFL-CIO brief on the plight of the worker in the twenty-first century, complete with references to yellow dogs, unequal bargaining power, and Lochner-era cases.2 It has been fashionable for some time, particularly among academics, to conceive of Supreme Court decisions as driven by something other than politics, and occasionally they are.3 But not here, and there is no denying that.

The issue presented in these cases was significantly more complicated than either opinion acknowledged. The cases all involved employer-imposed arbitration agreements that required employees not only to arbitrate their disputes, but also to do so individually rather than collectively. One of the employers emailed the arbitration agreements to all employees and another noted that the only way to decline the agreement was to quit. This is not unusual for arbitration agreements, but it presents a different scenario from what Justice Gorsuch described—these were not negotiated or freely entered into. These were agreements that were imposed as a condition of employment, a fact Justice Ginsburg emphasized.

But that is true with most arbitration agreements, particularly consumer agreements, which are often imposed without any awareness by the consumer, and the Supreme Court has always treated such agreements as voluntarily agreed to and thus presumptively valid.4 The Supreme Court has fallen in love with arbitration agreements going back to the 1980s, when courts started to view such agreements as a way to reduce clogged federal dockets.5 Indeed, in the last few years, the Supreme Court has twice approved class action waivers, even though it was clear in both instances that the amounts at issue were too low to justify individual lawsuits, making each case a class-action-or-nothing situation; the Supreme Court seemingly approved the nothing option.6

For the employees who were trying to free themselves from the arbitration agreements that required individual claims, it was clearly an uphill battle. What differentiates this case from the previous two is that the National Labor Relations Act (“NLRA”),7 passed in 1935, provides a core substantive right to employees to join labor organizations, bargain collectively, and, according to the language at issue in these cases, “engage in . . . other mutual aid or protection.”8 These are known as “section 7 rights” (after the provision of the NLRA in which they are contained), and they are unquestionably the core rights at issue in the NLRA. Justice Gorsuch noted that section 7 “focuses on the right to organize unions and bargain collectively,”9 but he was clearly wrong based on statutory language, which lists joining a labor organization and collective bargaining, and then adds “other mutual aid and protection.”10 A number of years ago, the Supreme Court upheld the section 7 rights of nonunion workers who were not seeking to collectively establish a union, but simply walked out of their workplace together in protest of frigid working conditions.11 That case was curiously absent from both opinions, but it is perhaps the best example of the scope of section 7 rights, which clearly go beyond union organizing and the related issue of collective bargaining.

More recently, section 7 has been successfully invoked in a large number of cases regarding social media posts involving employees. The Obama National Labor Relations Board (“NLRB”) was particularly aggressive in arguing that these posts (many of which were on Facebook, where they reached co-employees who were friends) implicated section 7 rights because they involved workplace issues (often pay or work conditions) and involved mutual aid because they reached multiple employees.12 Several appellate courts have affirmed that such cases can implicate section 7, and that employees therefore cannot be fired for their posts.13 This has been an important development given that union membership has been declining since the 1970s; there is little prospect for a substantial comeback, and today, most mutual aid or collective action in the workplace will arise outside of union organizing. In this way, the NLRB and courts have breathed new life into section 7 and have done so in a way that is consistent with the expansive view of such rights embodied in Supreme Court precedent.

Based on these cases, the employees—supported by the NLRB but not by the Trump Administration—argued that the arbitration agreements requiring individual claims violated section 7 because they prevented “mutual aid or protection.”14 In none of these cases, or others that had been filed, was there any union organizing going on, and indeed, the most common claims that were affected by the arbitration agreements were claims filed under the Fair Labor Standards Act (“FLSA”)15 for unpaid wages, often involving overtime. Employees claimed that these agreements prevented individuals from proceeding collectively as a class action under the FLSA, a violation of section 7, and were therefore unenforceable.

It should be noted that this argument developed only over the last five to ten years, largely in response to Supreme Court decisions upholding class action waivers. But this alone should not be surprising because the issue of class action waivers was also relatively new, and these cases posed the question of whether they could be used in the employment setting.

And this is where the Federal Arbitration Act (“FAA”)16 comes into play: a statute that was passed in 1925 but, as previously mentioned, has gained new attention in the last several decades as employers and businesses have started to impose arbitration agreements on their employees and customers. There were two relevant provisions of the Act: the general provision that essentially tells courts to treat arbitration respectfully, and what is known as the savings clause, which says that arbitration clauses are valid “save upon such grounds as exist at law or in equity for the revocation of any contract.”17 Assuming the waivers violated section 7, were they also unenforceable under the savings clause of the FAA?

These were two separate questions that the majority answered in favor of employers. Perhaps the most problematic conclusion the Court reached was that even if the arbitration agreements violated section 7, they were still enforceable because the savings clause only applies to general state law contract defenses. In other words, if there is a clash of statutes, the FAA wins, and the section 7 violation simply goes unremedied. It is hard to see how the Court could justify this conclusion; surely a violation of a federal statute should be seen as a ground that exists at law, as even Justice Thomas acknowledged (though he concluded there was not a public policy violation and thus the waivers were valid). There was also simply no reason, and none was offered, why the FAA would trump the NLRA. In fact, if one sought to determine which was more important as a matter of public policy, a strong argument could be made in favor of the NLRA, which provides the most comprehensive protection of any nondiscrimination statute to workers throughout the country, as opposed to the FAA, which not that long ago could have been described as an obscure federal statute. Justice Gorsuch also suggested that the Concepcion and Italian Colors cases resolved this dispute,18 something that was clearly wrong (neither involved a federal statute protecting collective rights) and was not a conclusion that other courts had reached.

There is a narrower route the Court could have taken to reach its desired result and that would have been consistent with its own precedent. The Court could have focused on the specific rights at issue in these cases and concluded that whatever the proper scope of section 7 might be, these claims did not fall within it. The claims at issue, like most of the group actions these days, involved claims under the FLSA, and it seems unlikely that section 7 of the NLRA was designed to protect collective action claims filed under other statutes. Most of the claims that have recently been brought under section 7, such as the Facebook cases or challenges to confidentiality policies, have been filed directly under that provision rather than through a separate statute like the FLSA.19 Indeed, if one were worried about protecting the collective action component of the FLSA, one would expect to find a provision under that statute. Moreover, in a common FLSA collective action case, an individual would file a claim and then seek to build a class, even though the parties did not necessarily work together or even know each other.

Rather than taking this narrow route, as advocated by a number of amici, the Court painted with a broad stroke to narrow the scope of section 7 despite its past precedent. The one part of the opinion that the Court got right was its refusal to defer to the NLRB’s interpretation of section 7. Over time, the NLRB has lost much, if not all, of its credibility by shifting positions any time the administration changes—and this is true of both Democratic and Republican boards. This is not a desirable way for any agency to conduct its business and surely not one worthy of deference, even when it might be correct on the law.

The employees never had a chance. The Court’s love affair with arbitration and its antipathy for workers, with a bit of hostility for class actions tossed in for good measure, could have led to a summary reversal of the lower courts that had sought to protect the right of workers to proceed collectively. This is not how it is supposed to work but, all too often, it is exactly how it does work.

Michael Selmi joined the law school faculty in 1996, after having taught at the University of North Carolina for two years. Prior to entering academia, he litigated employment discrimination cases at the Lawyers’ Committee for Civil Rights and the U.S. Department of Justice Civil Rights Division. He also served as a law clerk to Judge James R. Browning, then Chief Judge of the Ninth Circuit Court of Appeals. Professor Selmi teaches courses on employment law, employment discrimination, contracts, and civil rights. He has served as a visiting professor at Harvard Law School and Boston University.

Professor Selmi has published more than forty articles in the areas of employment discrimination, employment law, and constitutional law, and his articles have appeared in many law journals including the Stanford Law Review, Texas Law Review, Georgetown Law Journal, UCLA Law Review, and Virginia Law Review. He has co-written casebooks in employment discrimination, employment law, and the law of discrimination.

Professor Selmi has worked on a number of Supreme Court cases and has been a frequent media commentator for, among others, The New York Times, The Washington Post, The Wall Street Journal, NPR, and MSNBC.

  1. No. 16-285, slip op. (U.S. May 21, 2018).
  2. See id. at 3–6 (Ginsburg, J., dissenting).
  3. See generally Gregory C. Sisk, Michael Heise & Andrew P. Morriss, Charting the Influences on the Judicial Mind: An Empirical Study of Judicial Reasoning, 73 N.Y.U. L. Rev. 1377 (1998).
  4. See, e.g., Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013) (validating contractual waiver of class arbitration).
  5. The first employment case that allowed shifting discrimination claims from a judicial to an arbitral forum was Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), which followed a series of cases permitting arbitration for other federal statutory claims. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985); Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220 (1987); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989).
  6. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); Italian Colors, 570 U.S. at 228. Although Concepcion receives the most attention, Italian Colors was more important to these employment claims because the plaintiffs in that case had documented the improbability that anyone could afford to bring an individual as opposed to a collective claim; the Court shrugged its majority shoulders.
  7. 29 U.S.C. §§ 151–187 (2012).
  8. 29 U.S.C. § 157.
  9. Epic Systems Corp. v. Lewis, No. 16-285, slip op. at 11 (U.S. May 21, 2018) (majority opinion).
  10. 29 U.S.C. § 157.
  11. See NLRB v. Wash. Aluminum Co., 370 U.S. 9 (1962).
  12. See, e.g., Hispanics United of Buffalo, Inc. & Carlos Ortiz, 359 N.L.R.B. No. 37 (2012) (Facebook posts in response to job performance criticism are protected activity).
  13. See, e.g., NLRB v. Pier Sixty, LLC, 855 F.3d 115 (2d Cir. 2017) (social media post supporting the union and using vulgar language about a supervisor is protected activity).
  14. See Epic Systems Corp., slip op. at 12, 16.
  15. 29 U.S.C. §§ 201–219 (2012).
  16. 9 U.S.C. §§ 1–16 (2012).
  17. 9 U.S.C. § 2.
  18. See Epic Systems Corp., slip op. at 5–6.
  19. See, e.g., Hispanics United of Buffalo, Inc. & Carlos Ortiz, 359 N.L.R.B. No. 37, 3 (2012) (Facebook posts); NLRB v. Pier Sixty, LLC, 855 F.3d 115 (2d Cir. 2017) (social media posts).

Recommended Citation
Michael Selmi, Response, Epic Systems Corp. v. Lewis: Class Action Waivers—Employees Predictably Lose, Geo. Wash. L. Rev. On the Docket (June 6, 2018), https://www.gwlr.org/epic-systems-v-lewis.

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