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Supreme Court Finds FAA Outranks NLRA

Passed in 1925, the Federal Arbitration Act (FAA) mandates that a written provision requiring arbitration “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In the case of Epic Systems Corp. v. Lewis, the U.S. Supreme Court was called upon to decide whether the FAA could prevent employees from banding together, both in court and arbitration, to pursue their mutual claims.

The employees bringing suit argued that their rights under the National Labor Relations Act (NLRA) were “grounds as exist at law” and it should preempt the FAA. The NLRA, enacted in 1935, provides that:

“employees shall have the right to self-organization, to form, join or assist labor organizations, 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.”

Writing for the majority, Justice Neil Gorsuch asserted that the law on this issue was clear: arbitration agreements must be enforced as written. Because Congress did not specifically state that the NLRA displaced the FAA, the statutes must be read to “work in harmony.” He noted that the Supreme Court has “never read a right to class actions into the NLRA” and it would not do so now.
In her lengthy dissent, Justice Ruth Bader Ginsburg expressed concern for how this ruling will impact low-wage workers who fear retaliation. It may diminish their protection under employment statutes because they cannot band together to pursue claims in a class-action.