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Epic Systems Corporation v. Lewis

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Supreme Court of the United States
Epic Systems Corporation v. Lewis
Term: 2017
Important Dates
Argument: October 2, 2017
Decided: May 21, 2018
Outcome
Seventh Circuit reversed
Vote
5 - 4 to reverse
Majority
Neil Gorsuch • Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Samuel Alito
Concurring
Clarence Thomas
Dissenting
Ruth Bader Ginsburg • Stephen Breyer • Sonia Sotomayor • Elena Kagan


Epic Systems Corporation v. Lewis is a case argued during the October 2017 term of the U.S. Supreme Court. Argument in the case was held on October 2, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the 7th Circuit. The court consolidated arguments in the case with arguments in Ernst and Young v. Morris and NLRB v. Murphy Oil.


HIGHLIGHTS
  • The case: In 2014, Epic Systems Corporation required employees to consent to resolving individual wage-and-hour claims through arbitration. The arbitration agreement further stipulated that employees could not pursue those claims via a class action or collective action. Continued employment at Epic constituted consent to the agreement. Jacob Lewis filed a class action lawsuit in federal court against the company alleging the company failed to compensate him and other similarly-situated employees for overtime pay. Epic filed a motion to dismiss the lawsuit and to compel arbitration. A federal district court denied Epic's motion and a three-judge panel of the Seventh Circuit Court of Appeals held that the class or collective action waiver for work-related claims violated provisions of the National Labor Relations Act.
  • The issue: Can an employer prohibit employees from pursuing work-related claims in a class or collective action?
  • The outcome: The Supreme Court reversed the Seventh Circuit, holding that under the Arbitration Act, agreements to arbitrate must be enforced.[1]


    • You can review the lower court's opinion here.[2]
    Here are our pages on the consolidated cases: Ernst and Young v. Morris and NLRB v. Murphy Oil.

    Background

    Epic Systems Corporation (hereafter, Epic) was founded by Judith Faulkner in 1979, and as of 2018, was one of the largest healthcare software providers in America. In April of 2014, Epic sent an email to a group of its employees. The email contained a modified arbitration agreement. The agreement mandated that all wage-and-hour claims made by the email's recipients could be brought against Epic only through individual arbitration. The agreement further stipulated that an employee waived his or her right to participate in, or receive any civil award from, a class, collective, or representative proceeding. Continued employment at Epic constituted consent to the agreement, pursuant to the employee clicking two buttons to acknowledge receipt of the agreement. The agreement provided no option for employees to decline or reject the class or collective action waiver. Jacob Lewis, the respondent, registered his agreement with Epic through clicking the two buttons to acknowledge receipt of the agreement.[2]

    Some time later Lewis, a technical writer at Epic, filed a lawsuit in federal district court against Epic. Lewis claimed that Epic violated the Fair Labor Standards Act and Wisconsin law by illegally depriving Lewis and his fellow technical writers of mandatory overtime pay. Lewis claimed this was due to Epic's misclassification of him and the other affected employees. Epic filed a motion to dismiss Lewis' claim and compel individual arbitration in accordance with the company's arbitration agreement. Lewis claimed the agreement violated Section 7 of the National Labor Relations Act (hereafter, NLRA) because the agreement deprived Lewis of the opportunity to engage in protected collective action against his employer. Judge Barbara Crabb agreed with Lewis and denied Epic's motion to dismiss and to compel arbitration. Epic appealed to the United States Court of Appeals for the 7th Circuit. Epic's appeal was heard by a three-judge panel of the Seventh Circuit. On the panel were the circuit court's Chief Judge Diane Wood, Seventh Circuit Judge Ilana Rovner, and District Judge John Robert Blakey of the United States District Court for the Northern District of Illinois, who sat on the panel by designation.[2]

    In her opinion for a unanimous panel, Judge Wood upheld Judge Crabb's denial of Epic's motion to dismiss and to compel arbitration. In her opinion, Judge Wood relied on the language of Section 7 of the NLRA protecting concerted activities. In the court's view, these activities included the filing of a collective action or a class action lawsuit. While acknowledging that concerted activities is not defined under the NLRA, Judge Wood wrote that "collective or class legal proceedings fit well within the ordinary understanding of 'concerted activities.'" The court further held that the National Labor Relations Board's interpretation of concerted activities includes the filing of class action or collective action lawsuits, and that the Board's interpretation must be afforded Chevron deference by federal courts. Thus, the court held that the class or collective action waiver in Epic's arbitration agreement violated the NLRA.[2]

    Epic, however, argued that the Federal Arbitration Act (hereafter, FAA) superseded the NLRA's requirements. Specifically, Epic pointed to a provision of the FAA known as the FAA's savings clause, which said that any written contract "evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon grounds as exist at law or in equity for the revocation of any contract." Epic argued that in the absence of a contrary congressional command, its arbitration agreement must be enforced under the FAA and that nothing in the NLRA prohibited such an agreement. Judge Wood, however, argued that illegality constituted grounds for revoking a contract and that "because the provision at issue is unlawful under Section 7 of the NLRA, it is illegal, and meets the criteria of the FAA's savings clause for nonenforcement. ... Epic acted unlawfully in attempting to contract with Lewis to waive his Section 7 rights, regardless of whether Lewis agreed to that contract. The very formation of the contract is illegal."[2]

    In holding that Epic's arbitration agreement violated Section 7 of the NLRA and that the savings clause of the FAA did not mandate enforcement of an illegal arbitration agreement, the court upheld Judge Crabb's decision.[2]

    Petitioner's challenge

    Epic Systems Corporation, the petitioner, challenged the holding of the Seventh Circuit. Epic argued that its arbitration waiver was consistent with Section 7 of the National Labor Relations Act and, if not, that the waiver must still be enforced under the Federal Arbitration Act.

    Certiorari granted

    On September 2, 2016, Epic Systems Corporation, the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the Seventh Circuit. The U.S. Supreme Court granted Epic's certiorari request on January 13, 2017, consolidating arguments in the case with arguments in Ernst and Young v. Morris and NLRB v. Murphy Oil. Argument in the case was held on October 2, 2017.[3]

    Question presented

    Question presented:

    "Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act."[3]

    Audio

    • Audio of oral argument:[4]



    Transcript

    • Transcript of oral argument:[5]

    Outcome

    Decision

    On a vote of 5 - 4, the Supreme Court reversed the ruling of the Seventh Circuit. The Supreme Court held that under the Arbitration Act, agreements to arbitrate must be enforced.[1]

    Majority opinion

    Justice Neil Gorsuch authored the opinion for the court majority, joined by Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy, and Clarence Thomas.

    Gorsuch began by framing what he saw as the question at the heart of the case: whether employers and employees can contract to require arbitraiton, or whether an employee may always bring a collective action regardless of an agrement to arbitrate individually. Gorsuch ruled that the Federal Arbitration Act requires courts to enforce agreements to arbitrate and that the collective bargaining rights established in the National Labor Relations Act did not contravene the FAA's enforcement requirement:

    “ As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings. Nor can we agree with the employees’ suggestion that the National Labor Relations Act (NLRA) offers a conflicting command. It 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. The NLRA 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 . . 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.[1][6] ”


    Gorsuch rejected the employees' arguments that the savings clause of the NLRA invalidated agreements to arbitrate in cases like this, stressing that the cause only "permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability." Gorsuch also rejected the dissent's argument that the majority had overridden Congress' intent in passing the NLRA. Gorsuch wrote, "Today's decision merely declines to read into the NLRA a novel right to class action proedures that the Board's own general counsel disclaimed as recently as 2010."[1]

    Concurrence by Justice Thomas

    Justice Clarence Thomas joined the majority opinion in full and also wrote separately. Thomas wrote, "I write separately to add that the employees also cannot prevail under the plain meaning of the Federal Arbitration Act."[1]

    Dissent by Justice Ginsburg

    Justice Ruth Bader Ginsburg dissented, joined by Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Framing the case as she saw it, Ginsburg wrote, "Does the Federal Arbitration Act (Arbitration Act or FAA) permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations Act (NLRA) 'to engage in . . . concerted activities' for their 'mutual aid or protection'? The answer should be a resounding 'No.'"[1] She wrote:

    “ The Court ignores the reality that sparked the NLRA’s passage: Forced to face their employers without company, employees ordinarily are no match for the enterprise that hires them. Employees gain strength, however, if they can deal with their employers in numbers. That is the very reason why the NLRA secures against employer interference employees’ right to act in concert for their 'mutual aid or protection.' . . . The FAA demands no such suppression of the right of workers to take concerted action for their 'mutual aid or protection.'[1][6] ”


    Ginsburg would have concluded that the FAA does not protect contracts requiring individual arbitration because contracts to require individual arbitration violate the rights guaranteed by the NLRA and are therefore illegal. Citing earlier precedent for "the ordinarily superseding rule that 'illegal promises will not be enforced,'" she reasoned that the FAA could not allow for contracts that were illegal under other existing laws.[1]

    Text of the opinion

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 United States Supreme Court, "Epic Systems Corporation v. Lewis opinion," May 21, 2018
    2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 U.S. Court of Appeals for the Seventh Circuit, Jacob Lewis v. Epic Systems Corporation, May 26, 2016
    3. ↑ 3.0 3.1 Supreme Court of the United States, Epic Systems Corporation v. Jacob Lewis, January 13, 2017
    4. ↑ Supreme Court of the United States, Epic Systems Corporation v. Lewis, argued October 2, 2017
    5. ↑ Supreme Court of the United States, Epic Systems Corporation v. Lewis, argued October 2, 2017
    6. ↑ 6.0 6.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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