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Supreme Court Rules that Arbitration Provisions in Employment Contracts Requiring Individual Actions are Enforceable Under Federal Law

In its landmark decision, Epic Systems Corp. v. Lewis,[1] the Supreme Court ruled 5-4 that employers can enforce a provision in their employment contracts requiring that employees arbitrate their disputes with the employer individually, rather than collectively through a joint legal proceeding. In its decision, the Court addressed a supposed conflict between the Federal Arbitration Act, passed in 1925, and the National Labor Relations Act, which passed a decade later. The Federal Arbitration Act provides that an agreement to arbitrate a dispute “shall be valid irrevocable, and enforceable.” The NLRA gave employees the right to work together for “mutual aid and protection.”

Writing for the majority, Justice Gorsuch explained, “[i]t is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion.”[2] Addressing the Federal Arbitration Act, the Court noted that “Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.” The NLRA, however, “secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”[3] Considering the long history of these two statutes, the Court acknowledged that:

This Court has never read a right to class actions into the NLRA—and for three quarters of a century neither did the National Labor Relations Board. Far from conflicting, the Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this Court to declare the parties’ agreements unlawful.[4]

For employers, this decision confirms that arbitration provisions in employment agreements limiting disputes to individual actions are enforceable under federal law. Any employers interested in including such a provision should discuss it with their employment counsel.

[1] 138 S. Ct. 1612; 200 L. Ed. 2d 889 (2018).

[2] Epic Sys. Corp., 200 L. Ed. 2d at 897.

[3] Id.

[4] Id.