The Supreme Court just issued its ruling in the much-anticipated arbitration cases, Epic Systems, Murphy Oil, and Ernst & Young (click here for the Supreme Court’s decision). These cases pitted the Federal Arbitration Act (which permits the judicial enforcement of individual agreements to arbitrate) against the National Labor Relations Act (which in effect guarantees workers certain rights of collective action). Which statute won in this battle of individual vs. collective action? Not surprisingly, a majority of the Justices found that the FAA triumphed, while workers’ rights received a slow-motion Spartan kick to the chest (check out the famous Spartan kick from the movie 300).
I’m disappointed with the rulings, but considering the broader context of these cases, the Supreme Court’s opinions are not surprising. These cases continue the decades-long judicial expansion of the FAA and its steamrolling over anything in its path. Look at the 1984 decision in Southland v. Keating, which I believe has created significant constitutional problems; all the arbitrability decisions of the 1980s like the Mitsubishi and McMahon cases, which conveniently deleted key language of the FAA (look at how the Supreme Court misquotes the statute in Mitsubishi; if an attorney had engaged in a similar misquote of a statute, it would be borderline unethical); the Circuit City decision from 2001 – which judicially deleted the employment exclusion in the FAA created by Congress; the shrinking of the effective vindication doctrine in the American Express case; the triumph of the FAA over the parties’ agreement in the DIRECTV case; and the myriad FAA preemption cases like AT&T v. Concepcion, Preston, Casarotto, and Kindred Nursing. Also, examining procedure more broadly, these Epic Systems decisions perfectly fit the Court’s twisting and expansion of procedural law to make the enforcement of substantive rights more challenging, along the same lines as the Court’s dismantling of class action procedures and the Court’s manufacturing of heightened pleading standards in Twombly and Iqbal.
Based on the language and original intent of the FAA (which the Court has disregarded for decades), the FAA was never intended to cover labor or employment disputes. The NLRA should have easily won the day and controlled in these Epic Systems cases. I’ve extensively researched the history of the FAA, diving into the records and personal files of the drafters, and the drafters never intended the FAA to apply in the labor or employment context.
Through these Epic Systems cases, the FAA’s judicial transformation is now complete. Collective labor rights were a final frontier, a last major hope or stronghold against the FAA’s encroachment. The FAA’s drafters would be shocked to see its radical transformation, not by Congress, but through decades of deeply-flawed Supreme Court decisions. When arbitration is used properly, with meaningful consent and fair procedures and in limited contexts, it can be a powerful method of dispute resolution, superior to litigation in many ways. The FAA’s drafters envisioned an appropriate, more limited role for arbitration in American society. But the Supreme Court has mucked this up, with its overly-aggressive, erroneous expansion of the FAA, which does a disservice to arbitration.