Master The Supreme Court held that the FAA requires enforcement of employment arbitration agreements mandating individualized proceedings, and the NLRA does not provide a right to class or collective actions that overrides such agreements. with this comprehensive case brief.
Epic Systems v. Lewis is a landmark Supreme Court decision at the intersection of employment law, arbitration, and labor rights. The Court resolved a sharp circuit split over whether employers can require employees, as a condition of employment, to agree to individualized arbitration and waive participation in class or collective actions. The case pitted the Federal Arbitration Act’s strong policy favoring enforcement of arbitration agreements against the National Labor Relations Act’s protection of employees’ concerted activities, with billions of dollars in class and collective wage-and-hour litigation hanging in the balance.
For law students, Epic Systems is essential for understanding how courts reconcile overlapping federal statutes, interpret the FAA’s saving clause, and conceptualize the scope of NLRA Section 7 rights. The decision continues the Supreme Court’s modern arbitration jurisprudence (e.g., Concepcion and Italian Colors) that permits class-waiver enforcement, and it has reshaped the strategic landscape of employment disputes by steering many claims from aggregate litigation into individualized arbitration.
Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (U.S. 2018)
Epic Systems, a healthcare software company, required employees to agree, as a condition of employment, to arbitrate wage-and-hour disputes on an individualized basis and to waive the ability to participate in any class or collective proceeding. Jacob Lewis, an Epic employee, later sought to bring a collective action in federal court under the Fair Labor Standards Act (FLSA) and parallel state law. He argued the arbitration agreement’s class/collective action waiver was illegal under Section 7 of the National Labor Relations Act (NLRA), which protects employees’ rights to engage in concerted activities for mutual aid or protection. The Seventh Circuit agreed with Lewis, aligning with the National Labor Relations Board’s (NLRB) position (e.g., D.R. Horton) that such waivers are unlawful. Other circuits (notably the Fifth) had held the opposite. The Supreme Court granted certiorari and consolidated Epic Systems Corp. v. Lewis with Ernst & Young LLP v. Morris (from the Ninth Circuit) and NLRB v. Murphy Oil USA, Inc. (from the Fifth Circuit) to resolve the split over whether the FAA’s mandate to enforce arbitration agreements according to their terms yields to the NLRA’s protections of concerted activities.
Does the National Labor Relations Act’s protection of employees’ concerted activities invalidate agreements requiring individualized arbitration of employment disputes, or does the Federal Arbitration Act require enforcement of such agreements according to their terms?
Under the Federal Arbitration Act, courts must enforce arbitration agreements according to their terms, including terms requiring individualized proceedings, unless the FAA’s saving clause applies a generally applicable contract defense (e.g., fraud, duress, unconscionability) that does not uniquely target or interfere with arbitration. The NLRA’s Section 7 protects employees’ rights to engage in concerted activities related to organizing and collective bargaining, but it does not confer a substantive right to participate in class or collective litigation. Absent a clear congressional command to displace the FAA, courts will not infer that another federal statute overrides the FAA’s enforcement mandate.
The Supreme Court (5–4) held that the FAA requires enforcement of employment arbitration agreements that mandate individualized arbitration, and the NLRA does not render class or collective action waivers unlawful. The Court reversed the judgments that invalidated such waivers and affirmed the enforceability of individualized arbitration agreements.
The majority, authored by Justice Gorsuch, grounded its analysis in the FAA’s text, which instructs courts to enforce arbitration agreements according to their terms. The Court emphasized the FAA’s saving clause preserves only generally applicable contract defenses—not defenses that target arbitration’s fundamental attributes, such as the requirement of individualized proceedings. Relying on AT&T Mobility LLC v. Concepcion and American Express Co. v. Italian Colors Restaurant, the Court reasoned that invalidating agreements because they preclude class or collective procedures would impermissibly single out arbitration for disfavored treatment. Turning to the NLRA, the majority read Section 7’s protection of “concerted activities” in context with its specifically enumerated rights—self-organization, forming/joining labor organizations, and collective bargaining. It concluded that the statute concerns workplace organizing and bargaining rights, not procedural mechanisms of court or arbitral litigation. Because the NLRA does not speak with the requisite clarity to create a substantive right to class or collective actions, it does not displace the FAA. The Court also declined to defer to the NLRB’s contrary view, noting that Chevron deference is unwarranted where the Board’s interpretation would effectively override the FAA, a statute the NLRB does not administer, and where the asserted conflict is best resolved by the Court’s independent interpretation of both statutes. The majority rejected the employees’ other arguments. It found no basis in the FLSA to displace the FAA, noting the Court’s longstanding approval of arbitrating statutory claims. Nor did the FAA’s saving clause assist the employees, because their asserted defense—that class waivers are illegal under the NLRA—specifically impugned a defining feature of arbitration. In dissent, Justice Ginsburg argued that class and collective litigation is a paradigm form of concerted activity protected by Section 7 and warned that the ruling would weaken enforcement of wage-and-hour laws by curtailing aggregate litigation. The majority responded that any policy concerns must be addressed by Congress, not by judicially rewriting the statutes.
Epic Systems cements that employers may require individualized arbitration and class/collective action waivers in employment agreements, so long as ordinary contract defenses do not invalidate the agreement and no other federal statute clearly displaces the FAA. It reaffirms the Court’s pro-enforcement arbitration jurisprudence and clarifies that NLRA Section 7 does not include a right to pursue class or collective litigation. For law students, the case is a key study in statutory interpretation, the scope of the FAA’s saving clause, interstatutory conflicts, and the limits of Chevron deference when multiple federal statutes intersect. Practically, the decision channels many employment disputes—especially wage-and-hour claims—into individualized arbitration, reducing the availability of aggregate litigation and affecting settlement dynamics. It also frames subsequent cases: Lamps Plus (express consent required for class arbitration), New Prime (FAA § 1 transportation-worker exemption), Morgan v. Sundance (no special prejudice rule for FAA waiver), and Viking River Cruises (PAGA and FAA preemption). Counsel must also account for the FAA’s transportation-worker exemption and for any state-law contract defenses that are generally applicable and not arbitration-specific.
Yes. The Court treated both class and collective mechanisms as aggregate procedures inconsistent with agreements requiring individualized arbitration. The decision confirms that waivers of participation in Rule 23 class actions and FLSA § 16(b) collective actions are enforceable under the FAA, absent a contrary congressional command or a generally applicable contract defense.
The saving clause allows courts to refuse enforcement of arbitration agreements based on generally applicable contract defenses—fraud, duress, unconscionability—so long as those doctrines do not single out arbitration or interfere with fundamental attributes of arbitration (such as individualized proceedings). Defenses that target the class-waiver feature specifically because it is in arbitration will not fit within the saving clause.
No. The Court interpreted Section 7’s reference to “concerted activities” in context, concluding it addresses organizing and collective bargaining rights, not procedural rights to aggregate litigation. Without a clear congressional statement establishing a substantive right to litigate collectively, the NLRA does not override the FAA.
Employers can include clear class and collective action waivers and require individualized arbitration. Agreements should be drafted with plain language, mutuality, and fair procedures to withstand generally applicable contract defenses. Employers must also consider the FAA § 1 exemption for transportation workers and any applicable state-law defenses that do not discriminate against arbitration.
Not categorically. Parties may agree to class arbitration, but courts will not infer consent. Some representative mechanisms may persist depending on state or federal law and preemption (e.g., post–Viking River treatment of California PAGA claims is evolving). Legislative changes could also alter the landscape. But absent such developments, individualized arbitration clauses with valid waivers will generally foreclose aggregate proceedings.
The Court declined to defer to the NLRB’s view that the NLRA invalidates class waivers. It reasoned that reconciling the FAA and NLRA is a task for the judiciary, that the NLRB does not administer the FAA, and that no ambiguity justified Chevron deference to an interpretation that would effectively displace the FAA without a clear congressional command.
Epic Systems v. Lewis crystallizes the Supreme Court’s commitment to enforcing arbitration agreements as written, including individualized-proceeding requirements and class/collective action waivers. By holding that NLRA Section 7 does not establish a substantive right to aggregate litigation, the Court ensured that the FAA’s enforcement mandate prevails absent an explicit statutory override or a generally applicable contract defense.
For students and practitioners, the case is a touchstone for analyzing FAA saving clause arguments, statutory interpretation when two federal schemes potentially collide, and the practical design of employment dispute-resolution programs. It underscores that policy objections to individualized arbitration are for Congress to address, while courts apply the FAA’s text and the parties’ agreements.