Epic Systems Corp. v. Lewis

APPLICABILITY OF NLRA’S SECTIONS 7 AND 8

Epic Systems Corp, Ernst & Young LLP, and Murphy Oil (“Employers”) argue against applying the NLRA in this case, because it fails to mention both class actions and arbitrations. Moreover, Section 7 lacks a single reference to adjudication or arbitration. Additionally, Employers argue that the NLRA was enacted before the FLSA and Rule 23 of the Federal Rules of Civil Procedure, which adopted class actions, and before the advent of class arbitrations. Therefore, Employers argue that Congress could not have intended for the NLRA to protect the agreements at issue. Further, Employers contend that Congress’s intention in passing the NLRA was to encourage friendly resolution of labor disputes—a goal individual arbitration furthers. Moreover, Employers distinguish the enumerated “concerted activities” in Section 7 from class proceedings because the “concerted activities” impose no obligations on third parties, such as courts or arbitrators, whereas class proceedings do. Employers also argue that Section 8’s prohibition on interference in “concerted activities” would not be violated because employees may still cooperate with each other at all stages of the proceedings in any capacity they wish. Finally, Employers contend that an employer’s channeling of disputes into individual arbitration is merely a procedural restriction, not a substantive encroachment on Section 7 rights.

Lewis, Morris, et al., and the NLRB (“Employees”) reply that the plain meaning of “other concerted activity” for “mutual aid and protection” in Section 7 includes the right of employees to seek joint legal action against their employer. Employees argue that the fact that the NLRA predates Rule 23 and the FLSA is not dispositive because other collective litigation procedures, such as representative suits and joinder, long predate the NLRA. Employees further contend that the Court, citing Congressional intent, has repeatedly defined “concerted activities” broadly in the labor context.In fact, Employees note that the NLRA’s statement of policy proclaims its intent is to protect employees’ full freedom of association, including the right to joint legal action. Employees further argue that protecting their ability to jointly resolve workplace disputes will lead to less industrial strife—a goal of the NLRA’s passing. . Additionally, Employees contend that forming a union, an uncontested protected activity under Section 7, requires the participation of the NLRB and potentially the courts, thus rendering Employers’ argument regarding third party obligations null. . Employees also maintain that Section 8 of the NLRA makes it unlawful to interfere with a concerted activity. Requiring a class action waiver, Employees assert, interferes with the concerted activity of seeking joint legal action, and thus such an agreement is unlawful. Employees argue that Section 7 grants them a substantive right to pursue joint claims against an employer free of interference, and therefore the argument presented by Employers distinguishing between substantive and procedural rights under Section 7 is irrelevant. Similarly, Employees also argue that the protected activity here is the concerted use of procedures to improve their lot, thus class proceedings are a “concerted activity” regardless of third party obligations, such as class certification by an arbitrator.

ENFORCEABILITY UNDER THE FAA

Employers argue that, consistent with Court precedent, the Federal Arbitration Act (“FAA”) applies due to the absence of a clearly expressed Congressional intent to the contrary in the NLRA. Further, Employers contend that the FAA governs employment contracts and, thus, the arbitration provisions at issue are “valid, irrevocable, and enforceable”. . Employers also argue that the saving clause of the FAA, limiting the extent to which the statute overrides previous statutes or general contract principles, does not apply here. . Employers maintain that saving clauses in federal statutes apply to state or federal common law but not to other federal statutes such as the NLRA.Additionally, Employers contend that the saving clause applies only with generally applicable contract defenses, and not with contractual subsets such as the employment agreements at issue here. Under the equal-treatment principle of the FAA, Employers argue, the saving clause does not apply if it disrupts fundamental attributes of arbitration. Employers contend that class arbitrations lose the timesaving and cost benefit—defining characteristics of arbitration—and, therefore, the saving clause does not apply.Moreover, Employers assert that the saving clause can be exercised only on grounds for “revocation” of a contract, that is, those defenses against enforcement specific to the contract’s formation. Employers maintain that because the NLRA does not relate to the formation of the contracts at issue, the saving clause does not apply and, thus, the FAA mandates enforcement of the arbitration provisions.

Employees counter that the ban on joint action is illegal under the NLRA, and thus, applying the FAA is superfluous. Further, Employees contend that the agreements are illegal under the FAA as well. The Employees argue that because the arbitration agreements at issue are in conflict with the NLRA, a federal statute, the FAA’s “saving clause” and principles of contract law mandate that the contract be void. Employees also assert that, contrary to what Employer’s argue, the Court has previously enforced saving clauses with respect to other federal statutes, such as in TC Heartland, LLC v. Kraft Foods Group Brands, LLC. Employees also maintain that saving clauses have never been applied to defenses targeting arbitration specifically. Employees contend that any contract defense invalidating an arbitration agreement interferes with the agreement’s existence, a “fundamental attribute”. Therefore, Employees argue that a rule preventing the exercise of the saving clause if it interferes with a “fundamental attribute of arbitration” would nullify the clause. Employees further assert that Employers’ argument restricting the saving clause to defenses relating to the formation of a contract could lead to FAA enforcement of otherwise illegal contracts. Additionally, Employees state that the joint-action ban is illegal because the prospective-waiver doctrine forbids enforcement of an agreement that suspends a party’s right to pursue statutory remedies. Further, Employees contend that the NLRA, having been substantively amended multiple times, supports an implied repeal of contrary provisions under the FAA and supersedes its mandates.