In its eagerly-awaited opinion in Epic Systems Corp. v. Lewis, the U.S. Supreme Court held on May 21 that class action waivers in arbitration agreements between employers and employees do not violate the National Labor Relations Act. The opinion resolves a split among federal circuits, and reiterates—once again—the strong federal policy favoring arbitration.
While challenges to class action waivers have been rather popular in recent years, the legal conclusion that such waivers are permissible is, in the words of the Supreme Court, “clear” and “unmistakable.” As Justice Gorsuch wrote for the 5-4 majority, “[i]n the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.”
Generally speaking, the FAA applies to an arbitration agreement—and preempts all state laws—when the economic activities of the parties have some nexus to interstate commerce. The application of Epic Systems to the relatively smaller group of arbitration agreements not subject to the FAA remains to be seen.
The opinion ostensibly abrogates last year’s decision of the New York State Appellate Division in Gold v. New York Life Ins. Co., 153 A.D.3d 218 (1st Dep’t 2017), which relied on the Seventh Circuit’s decision in Epic Systems—now reversed—to declare class and collective action waivers in arbitration agreements unenforceable under the NLRA. The opinion also calls into question the rules issued by New York City’s Department of Consumer Affairs under the Freelance Isn’t Free Act, which state that “[i]f a contract [between a hiring party and a freelance worker] includes language that waives or limits a freelance worker’s right to participate in or receive money or any other relief from any class, collective, or representative proceeding, said waiver or limitation is void.” See N.Y.C. Rules, Tit. 6, § 12-05(b).
Stay tuned for further analysis of this groundbreaking development.