In a five-to-four decision in Epic Systems Corp. v. Lewis, the U.S. Supreme Court determined that arbitration agreements providing for individualized proceedings between an employee and an employer must be enforced as written, and that employees who enter into such agreements cannot litigate federal claims against their employers on behalf of a nationwide class under the collective-action provision set forth in the Fair Labor Standards Act, 29 U.S.C. § 216.
The Court reached its decision upon consideration of three consolidated actions, each of which involved employees who had entered into agreements with their employers providing for individualized arbitration, but who sought to bring wage-and-hour claims against their employers on a collective basis. The Court ultimately rejected the employees’ argument that, because an agreement requiring individualized arbitration proceedings barred the employees from engaging in concerted activities in violation of § 7 of the National Labor Relations Act, 29 U.S.C. § 157, their arbitration agreements were unenforceable under the “saving clause” of the Federal Arbitration Act, 9 U.S.C. § 2, which allowed courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.”
The majority, speaking through Justice Neil M. Gorsuch, explained that the Federal Arbitration Act’s saving clause did not apply here, because the saving clause recognized only defenses that applied to “any” contract, and the employees were not arguing that their arbitration agreements were extracted by fraud, duress, or through other unconscionable means that would render any contract unenforceable; rather, they objected to the enforcement of their arbitration agreements specifically because the agreements required individualized arbitration proceedings instead of class or collective ones. Justice Gorsuch further disagreed with the opinion of the dissent, authored by Justice Ruth Bader Ginsberg, that the collective-litigation waivers contained in the arbitration agreements were unlawful under the National Labor Relations Act, explaining that there was nothing to indicate that the National Labor Relations Act guaranteed class or collective-action procedures.
Writing separately in a concurring opinion, Justice Clarence Thomas reiterated that the Federal Arbitration Act’s saving clause did not apply even if the class-action waivers contained in the arbitration agreements were illegal, because, under Restatement Second of Contracts §§ 178 and 179, illegality was a public-policy defense, and the saving clause applied only to grounds for revocation of an arbitration agreement that concerned the formation of the arbitration agreement. Justice Thomas explained that, because refusal to enforce a contract for public-policy reasons did not concern whether the contract was properly made, the saving clause did not apply.
Read the case here.