Employee Class Actions: Will the Supreme Court Cut Out the “[H]eart of the New Deal”?

On Behalf of | February 26, 2018 | Class Action, Collective Actions

Any day now, the Supreme Court will issue its decision in Epic Systems Corp. v. Lewis,[1] a case that will determine whether employers can force employees to resolve legal claims through individual arbitration, without recourse to class or collective proceedings. Section 7 of the National Labor Relations Act would seem to prohibit such arbitration clauses. Specifically, Section 7 grants employees the right “to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”[2] As U.S. Courts of Appeals have held, “a collective or class action suit constitutes ‘concerted activit[y]’ under Section 7.”[3]

But in recent years, the Supreme Court has let corporations use arbitration agreements as a shield against class-action lawsuits. In 2011, in AT&T Mobility LLC v. Concepcion,[4] the Court held that states cannot extend the right to pursue class-actions to consumers who have signed class-action waivers, even when these waivers are buried in Dickensian-length fine print. Two years later, in American Express Co. v. Italian Colors Restaurant,[5] the Supreme Court upheld a class-action waiver routinely used by American Express, even though the plaintiffs demonstrated that a class-action lawsuit was their only cost-effective means for pursuing valid legal claims.

Concepcion and Italian Colors have emboldened companies to insert class-action waivers into employment as well as consumer contracts.[6] And they have done so on a dramatic scale: approximately 25 million workers now have employment contracts containing class-action waivers.[7]

One of these workers is Jacob Lewis, a Wisconsin-based employee of software giant Epic Systems, and the named plaintiff in Epic Systems Corp. v. Lewis. Lewis, like countless coworkers, signed a standard form employment contract forfeiting his right to pursue wage-and-hour claims against Epic Systems on a class or collective basis. But when Epic Systems then denied him overtime pay, Lewis decided to fight back. In February 2015, he sued Epic Systems on behalf of himself and similarly situated employees and argued that the class-action waiver they had all signed was legally void. A federal district court judge agreed, and the Court of Appeals for the Seventh Circuit affirmed, finding that Section 7 of the National Labor Relations Act guarantees employees the right to engage in class and collective actions. Epic Systems appealed and, on January 13, 2017, the Supreme Court agreed to hear the case.

The Court has since consolidated Epic Systems with two similar cases that arose in California and Alabama, respectively, Ernst & Young v. Morris and National Labor Relations Board v. Murphy Oil USA, Inc. In Morris, the Court of Appeals for the Ninth Circuit struck down an employment class-action waiver, finding such waivers to be “the ‘very antithesis’ of [Section] 7’s substantive right to pursue concerted work-related legal claims.”[8] In Murphy Oil USA, the Court of Appeals for the Fifth Circuit came out the other way, holding that “an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions.”[9]

On October 2, 2017, the Supreme Court heard oral arguments on these consolidated actions. As more than one justice recognized, binding employees to coercive class-action waivers would undermine the basic aim of the National Labor Relations Act, namely, “to equalize the bargaining power of the employee with that of his employer by allowing employees to band together.”[10] Justice Ginsburg noted that “there is no true bargaining” in class-action waivers: “[If] the employer says you want to work here, you sign this [class-action waiver]. It’s what was called a ‘yellow dog’ contract . . . That is, that there is no true liberty to contract on the part of the employee.”[11] Justice Breyer painted an equally stark picture, telling Paul Clement, who represents the employers, “I’m worried [that] what you are saying is overturning labor law that goes back to [] FDR at least, the entire heart of the New Deal . . . I haven’t seen a way that you can, in fact, win the case . . . without undermining and changing radically what has gone back to the New Deal.”[12] More conservative justices, in contrast, expressed less interest in preserving decades-old worker protections. Chief Justice Roberts, for example, seemed more concerned with the specter of “invalidat[ing] . . . [class-action waiver] agreements covering 25 million employees.”[13]

The one point on which all sides agree is that the stakes of the case are high. At stake is a bedrock principle of the New Deal—the conviction, as Franklin Roosevelt put it, that “[l]iberty requires opportunity to make a living . . . which gives man not only enough to live by, but something to live for.” Today, in the midst of weakened unions and record wealth inequality,[14] the Supreme Court would do well to respect Section VII and the values it embodies.


[1] Epic Systems Corp. v. Lewis, cert. granted, No. 16-285 (argued Oct. 2, 2017).[2] 29 U.S.C. § 157 (emphasis added).[3] See Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1152 (7th Cir. 2016), cert. granted, 137 S. Ct. 809 (2017) (citing cases).[4] 563 U.S. 333 (2011).[5] 570 U.S. 228 (2013).[6] See Hiro N. Aragaki, “The Federal Arbitration Act as Procedural Reform,” 89 N.Y.U. L. Rev. 1939 (2014).[7] Stephen A. Miller and Haryle Kaldis, “Supreme Court Examines Intersection of Class Waivers and Employees’ Rights,” The Legal Intelligencer (December 24, 2017), available at: https://www.law.com/thelegalintelligencer/sites/thelegalintelligencer/2017/12/04/supreme-court-examines-intersection-of-class-waivers-and-employees-rights/.[8] Morris v. Ernst & Young, LLP, 834 F.3d 975, 983 (9th Cir. 2016).[9] Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013, 1016 (5th Cir. 2015).[10] NLRB v. City Disposal Sys., Inc., 465 U.S. 822, 835 (1984).[11] Id. at 11.[12] Epic Systems Co. v. Lewis, 2017 WL 4882790, 7-9 (U.S. Oral. Arg., Oct. 2, 2017).[13] Id. at 55-56.[14] Grace Donnelly, “Top CEOs Make More in Two Days Than an Average Employee does in One Year,” Fortune (July 20, 2017), available at: http://fortune.com/2017/07/20/ceo-pay-ratio-2016/