Epic Systems Corp., a Wisconsin-based employer, required employees to agree to arbitration agreements providing that wage-and-hour disputes would be resolved through individualized arbitration and that employees waived the right to participate in class or collective proceedings. Employee Jacob Lewis assented (by continuing employment after receiving the agreement via email) but later filed a collective action in federal court alleging violations of the Fair Labor Standards Act (FLSA) and Wisconsin law. Epic moved to compel individual arbitration. The district court denied the motion, and the Seventh Circuit affirmed, reasoning that the agreement violated NLRA § 7's protection of employees' rights to engage in concerted activities. Similar disputes arose in related cases—Ernst & Young LLP v. Morris (Ninth Circuit) and NLRB v. Murphy Oil USA, Inc. (Fifth Circuit)—which split on whether the NLRA invalidated class or collective waivers in arbitration agreements. The Supreme Court granted certiorari and consolidated the cases to resolve the conflict.
Does the Federal Arbitration Act require enforcement of employment arbitration agreements that mandate individualized arbitration and waive class or collective proceedings, or does the National Labor Relations Act render such waivers unlawful as an interference with employees' rights to engage in protected concerted activities?
Under the Federal Arbitration Act, courts must enforce arbitration agreements according to their terms, including provisions requiring individualized proceedings, unless a generally applicable contract defense (e.g., fraud, duress, unconscionability) renders the contract unenforceable (the FAA's savings clause). A conflicting federal statute may override the FAA only if it contains a clear and manifest congressional command to displace arbitration. The NLRA § 7 protects employees' rights to self-organization, collective bargaining, and other concerted activities in the workplace, but it does not create a substantive right to participate in class or collective litigation. Accordingly, absent a contrary congressional command, arbitration agreements with class/collective action waivers remain enforceable. See AT&T Mobility LLC v. Concepcion; American Express Co. v. Italian Colors Restaurant; CompuCredit Corp. v. Greenwood; Shearson/American Express Inc. v. McMahon.
Yes. Employment arbitration agreements that require individualized arbitration and waive class or collective proceedings are enforceable under the FAA and are not invalidated by the NLRA. The Court reversed the Seventh and Ninth Circuits (Epic Systems and Ernst & Young) and affirmed the Fifth Circuit (Murphy Oil).
1) FAA requires enforcement of individualized procedures: The Court reiterated the FAA's core command: arbitration agreements must be enforced as written. Class or collective procedures are not inherent to arbitration but are procedural mechanisms that fundamentally change arbitration's speed, informality, and cost profile. Under Concepcion and Italian Colors, rules that target arbitration's fundamental attributes—such as a requirement of individualized proceedings—cannot be saved by the FAA's savings clause, which preserves only generally applicable contract defenses. 2) NLRA does not confer a right to class/collective litigation: Turning to the NLRA, the Court examined § 7's text, which protects employees' rights to organize, form unions, bargain collectively, and engage in "other concerted activities" for mutual aid or protection. Reading the statute in context and using traditional canons (including ejusdem generis), the Court concluded that "other concerted activities" refers to activities akin to organizing and collective bargaining in the workplace, not procedural rights to use class or collective litigation devices in court or arbitration. The NLRA is silent about class or collective litigation, and when Congress intends to create such procedural mechanisms, it does so expressly (e.g., FLSA § 216(b), Rule 23). Silence is insufficient to displace the FAA. 3) No contrary congressional command: A federal statute displaces the FAA only where Congress clearly indicates such an intent. The Court found no such clear command in the NLRA or in the Norris–LaGuardia Act. The latter, like the NLRA, aims at yellow-dog contracts preventing unionization and related worker organizing, not litigation procedures. 4) FAA savings clause inapplicable: The employees argued that the agreements were illegal under the NLRA and therefore unenforceable under the FAA's savings clause. The Court rejected this, explaining that the asserted "illegality" targets the individualized nature of arbitration—a defining attribute of arbitration—rather than a generally applicable contract defense like fraud or duress. Thus, the savings clause does not apply. 5) Agency deference not warranted: The Court declined to defer to the NLRB's contrary view (which had evolved in recent years), noting that the Board does not administer the FAA and that harmonizing or prioritizing overlapping statutes is a judicial task. Deference is especially unwarranted where the agency interpretation would effectively override another federal statute without a clear congressional command. 6) Precedent and policy: The majority anchored its approach in recent FAA jurisprudence (Concepcion, Italian Colors, Stolt-Nielsen) underscoring that class procedures are inconsistent with the traditional features of arbitration. The dissent, by contrast, emphasized workers' collective rights and the practical impediments to vindicating low-value claims individually, but the majority responded that such policy arguments are for Congress, not the courts, to resolve.
Epic Systems cements the enforceability of class and collective action waivers in employment arbitration agreements, dramatically shaping the landscape of wage-and-hour and other statutory employment claims. It clarifies that the FAA's pro-enforcement mandate prevails absent a clear contrary congressional command and that the NLRA's protections for concerted activity do not extend to a substantive right to class or collective litigation. For law students, Epic Systems is a touchstone for: (1) harmonizing potentially conflicting federal statutes; (2) the scope of the FAA's savings clause; (3) the Court's treatment of class procedures in arbitration; and (4) limits on Chevron deference when multiple statutes are implicated.
Epic Systems v. Lewis underscores the Supreme Court's commitment to enforcing arbitration agreements as written, even in the employment context, and clarifies that the NLRA does not grant a freestanding right to participate in class or collective litigation. By declining to find a contrary congressional command in the NLRA or Norris–LaGuardia Act, the Court reaffirmed the primacy of the FAA in the absence of explicit statutory directives to the contrary.