U.S. Department of Justice Changes Its Position Before the Supreme Court in Epic System Corp. v. Lewis

Government Argues that Employee Arbitration Agreements with Class-Action Waivers Are Enforceable June 20, 2017
In 2012, the National Labor Relations Board held that an employer violates the National Labor Relations Act (“NLRA”) by requiring its employees to sign an arbitration agreement with a class-action waiver as a condition of employment.  D.R. Horton, Inc., 357 N.L.R.B. No. 184, 2012 WL 36274, at *1 (2012).  The Board reasoned that such agreements interfere with employees’ right to “engage in concerted action for mutual aid or protection.”  Id.  The Board took the position that arbitration agreements with class waivers are contrary to the NLRA after the U.S. Supreme Court upheld such agreements generally in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

Circuit courts have divided over the Board’s decision.  The Fifth Circuit has twice rejected the Board’s reasoning, holding that its effect “is to disfavor arbitration” in violation of the Federal Arbitration Act (“FAA”), and the NLRA does not contain a “congressional command overriding” the FAA.  D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 359, 362 (5th Cir. 2013); Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013, 1016 (5th Cir. 2015).  The Second and Eighth Circuit have similarly concluded that “arbitration agreements containing class waivers [are] enforceable.”  Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 298 n.8 (2d Cir. 2013); Patterson v. Raymours Furniture Co., 659 F. App’x 40 (2d Cir. 2016).  The Seventh and Ninth Circuits, however, adopted the Board’s position.  Morris v. Ernst & Young LLP, 834 F.3d 975 (9th Cir. 2016); Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016).

In September 2016, the Obama Administration Department of Justice (“DOJ”), together with the Board, petitioned the Supreme Court to grant certiorari in the Fifth Circuit case.  On January 13, 2017, the Supreme Court granted certiorari in the Fifth, Seventh, and Ninth Circuit cases, and consolidated the appeals in Epic Systems Corp. v. Lewis, No. 15–2997.  On June 16, 2017, the DOJ, now under the Trump Administration, changed position and filed an amicus brief in support of the petitioners in the Seventh and Ninth Circuit cases.  Because the DOJ is now arguing against the Board’s position, it authorized the Board to represent itself before the Supreme Court in this case.

The DOJ’s amicus briefs are often granted substantial weight by the Supreme Court, so the DOJ’s change of position may affect the litigation before the Court.  Many employers nationwide have entered into arbitration agreements with class waivers, and the Court’s decision will be of substantial importance to these employers, as well as employers contemplating entering into similar agreements.

Class and Collective Actions