Epic Systems, Inc. v. Lewis

Victory! Supreme Court rules for freedom of contract

Cases > Separation of Powers > Epic Systems, Inc. v. Lewis
Won: The decision upheld workers' and employers' freedom to choose how to resolve workplace disputes - including arbitration.
Case Court: U.S. Supreme Court

Under its terms of employment, Epic Systems, Inc. required that employees agree to handle any workplace dispute individually. This meant waiving any future class-action or collective arbitration—a freedom of contract protected by the Federal Arbitration Act (FAA). Lower courts disagreed, saying the company’s one-on-one arbitration agreement and class-action waiver violated the National Labor Relations Act’s (NLRA) protection of concerted activities for workers’ mutual benefit. At the request of Epic Systems, PLF filed a friend of the court brief asking the U.S. Supreme Court to decide if the NLRA trumps the FAA. On May 21, 2018, the Supreme Court ruled 5-4 in favor of Epic and the freedom of contract.

Epic Systems required its employees to agree to handle workplace disputes through one-on-one arbitration, thus waiving any class, collective, or representative proceeding. Jacob Lewis agreed and signed an employment contract with Epic. Ten months later, Lewis sued Epic in federal district court on behalf of himself and the company’s other technical writers for alleged violations of the Fair Labor Standards Act.

Epic moved to dismiss based on the arbitration agreement and class-action waiver. The district court, however, agreed with Lewis that the mandatory individual arbitration violated the employees’ right under the National Labor Relations Act (NLRA) to engage in concerted activities for mutual benefit. The Seventh Circuit affirmed on the grounds that the “concerted activities” statute controls and the Federal Arbitration Act (FAA) simply does not apply and therefore creates no conflict with the NLRA.

In a friend of the court brief filed in this case, which was consolidated with two others raising the same issue, PLF argued the NLRA does not create the right to pursue claims unrelated to the NLRA on a class basis. The FAA allows employees and employers to freely contract for dispute resolution in any way they wish, including one-on-one resolutions and class-action waivers.

The U.S. Supreme Court heard the case in October 2017, and on May 21, 2018, the Court agreed that the National Labor Relations Act creates no impediment to employment contracts that provide for individual arbitration of workplace disputes.

Justice Neil Gorsuch, writing for the majority in the 5-4 decision said:

“In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings. The National Labor Relations Act does not offer a conflicting command.”

The decision is a win for employers and employees across the nation. And it is also a huge victory for the entrepreneurial spirit underlying free enterprise, which depends upon respect for the people’s right to enter into, be bound by, and to enforce contractual obligations.

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What’s at stake?

  • Individual arbitration of workplace disputes benefits workers by quickly resolving the problem, with monetary recovery to employees equal or better than that achieved in court.
  • Contracts are a matter of consent, not coercion, and accordingly, contracts must be enforced according to their terms.

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