Case Style: Jacob Lewis v. Epic Systems Corporation
Case Number: 15-2997
Court: United States Court of Appeals for the Seventh Circuit on appeal from the Western District of Wisconsin (Dane County) 15-cv-82
Plaintiff's Attorney: Jason Joel Knutson, James Jansen, Caitlin Marie Madden, William Ernest Parsons, Daniel Anthony Rottier, Breanne Leigh Snapp, Katelynn Mary Williams and David Zoeller
Defendant's Attorney: Noah A. Finkel, Andrew Lylburn Scroggins
Description: Epic Systems, a health care software
company, required certain groups of employees to agree to
bring any wage-and-hour claims against the company only
through individual arbitration. The agreement did not permit
* Of the Northern District of Illinois, sitting by designation.
2 No. 15-2997
collective arbitration or collective action in any other forum.
We conclude that this agreement violates the National Labor
Relations Act (NLRA), 29 U.S.C. §§ 151, et seq., and is also unenforceable
under the Federal Arbitration Act (FAA), 9 U.S.C.
§§ 1, et seq. We therefore affirm the district court’s denial of
Epic’s motion to compel arbitration.
On April 2, 2014, Epic Systems sent an email to some of its
employees. The email contained an arbitration agreement
mandating that wage-and-hour claims could be brought only
through individual arbitration and that the employees
waived “the right to participate in or receive money or any
other relief from any class, collective, or representative proceeding.”
The agreement included a clause stating that if the
“Waiver of Class and Collective Claims” was unenforceable,
“any claim brought on a class, collective, or representative action
basis must be filed in a court of competent jurisdiction.”
It also said that employees were “deemed to have accepted
this Agreement” if they “continue[d] to work at Epic.” Epic
gave employees no option to decline if they wanted to keep
their jobs. The email requested that recipients review the
agreement and acknowledge their agreement by clicking two
buttons. The following day, Jacob Lewis, then a “technical
writer” at Epic, followed those instructions for registering his
Later, however, Lewis had a dispute with Epic, and he did
not proceed under the arbitration clause. Instead, he sued
Epic in federal court, contending that it had violated the Fair
Labor Standards Act (FLSA), 29 U.S.C. §§ 201, et seq. and Wisconsin
law by misclassifying him and his fellow technical
writers and thereby unlawfully depriving them of overtime
No. 15-2997 3
pay. Epic moved to dismiss Lewis’s claim and compel individual
arbitration. Lewis responded that the arbitration clause violated
the NLRA because it interfered with employees’ right
to engage in concerted activities for mutual aid and protection
and was therefore unenforceable. The district court agreed
and denied Epic’s motion. Epic appeals, arguing that the district
court erred in declining to enforce the agreement under
the FAA. We review de novo a district court’s decision to deny
a motion to compel arbitration. Gore v. Alltel Commc’ns, LLC,
666 F.3d 1027, 1033 (7th Cir. 2012).
Section 7 of the NLRA provides that “[e]mployees 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.” 29 U.S.C. § 157. Section 8 enforces Section
7 unconditionally by deeming that it “shall be an unfair labor
practice for an employer ... to interfere with, restrain, or coerce
employees in the exercise of the rights guaranteed in [Section
7].” Id. § 158(a)(1). The National Labor Relations Board is “empowered
... to prevent any person from engaging in any unfair
labor practice ... affecting commerce.” Id. § 160(a).
Contracts “stipulat[ing] ... the renunciation by the employees
of rights guaranteed by the [NLRA]” are unlawful and
may be declared to be unenforceable by the Board. Nat’l Licorice
Co. v. NLRB, 309 U.S. 350, 365 (1940) (“[I]t will not be open
to any tribunal to compel the employer to perform the acts,
which, even though he has bound himself by contract to do
4 No. 15-2997
them, would violate the Board’s order or be inconsistent with
any part of it[.]”); J.I. Case Co. v. NLRB, 321 U.S. 332, 337 (1944)
(“Wherever private contracts conflict with [the Board’s] functions,
they obviously must yield or the [NLRA] would be reduced
to a futility.”). In accordance with this longstanding
doctrine, the Board has, “from its earliest days,” held that
“employer-imposed, individual agreements that purport to
restrict Section 7 rights” are unenforceable. D. R. Horton, Inc.,
357 N.L.R.B. No. 184 at *5 (2012) (collecting cases as early as
1939), enf’d in part and granted in part, D.R. Horton, Inc. v. NLRB,
737 F.3d 344 (5th Cir. 2013). It has done so with “uniform judicial
approval.” Id. (citing as examples NLRB v. Vincennes
Steel Corp., 117 F.2d 169, 172 (7th Cir. 1941), NLRB v. Jahn &
Ollier Engraving Co., 123 F.2d 589, 593 (7th Cir. 1941), and
NLRB v. Adel Clay Products Co., 134 F.2d 342 (8th Cir. 1943)).
Section 7’s “other concerted activities” have long been held
to include “resort to administrative and judicial forums.”
Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978) (collecting cases).
Similarly, both courts and the Board have held that filing a
collective or class action suit constitutes “concerted activit[y]”
under Section 7. See Brady v. Nat’l Football League, 644 F.3d 661,
673 (8th Cir. 2011) (“[A] lawsuit filed in good faith by a group
of employees to achieve more favorable terms or conditions
of employment is‘concerted activity’ under § 7 of the National
Labor Relations Act.”); Altex Ready Mixed Concrete Corp. v.
NLRB, 542 F.2d 295, 297 (5th Cir. 1976) (same); Leviton Mfg. Co.
v. NLRB, 486 F.2d 686, 689 (1st Cir. 1973) (same); Mohave Elec.
Co-op., Inc. v. NLRB, 206 F.3d 1183, 1189 (D.C. Cir. 2000) (single
employee’s filing of a judicial petition constituted “concerted
action” under NLRA where “supported by fellow employees”);
D. R. Horton, 357 N.L.R.B. No. 184, at *2 n.4 (collecting
cases). This precedent is in line with the Supreme Court’s rule
No. 15-2997 5
recognizing that even when an employee acts alone, she may
“engage in concerted activities” where she “intends to induce
group activity” or “acts as a representative of at least one
other employee.” NLRB v. City Disposal Systems, Inc., 465 U.S.
822, 831 (1984).
Section 7’s text, history, and purpose support this rule. In
evaluating statutory language, a court asks first “whether the
language at issue has a plain and unambiguous meaning with
regard to the particular dispute in the case.” Exelon Generation
Co., LLC v. Local 15, Int’l Bhd. of Elec. Workers, AFL-CIO, 676
F.3d 566, 570 (7th Cir. 2012). In doing so, it “giv[es] the words
used their ordinary meaning.” Lawson v. FMR LLC, 134 S. Ct.
1158, 1165 (2014) (internal citation omitted). “Absent a clearly
expressed legislative intention to the contrary, that language
must ordinarily be regarded as conclusive.” Consumer Prod.
Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980).
The NLRA does not define “concerted activities.” The ordinary
meaning of the word “concerted” is: “jointly arranged,
planned, or carried out; coordinated.” Concerted, NEW OXFORD
AMERICAN DICTIONARY 359 (3d ed. 2010). Activities are
“thing[s] that a person or group does or has done” or “actions
taken by a group in order to achieve their aims.” Id. at 16. Collective
or class legal proceedings fit well within the ordinary
understanding of “concerted activities.”
The NLRA’s history and purpose confirm that the phrase
“concerted activities” in Section 7 should be read broadly to
include resort to representative, joint, collective, or class legal
remedies. (There is no hint that it is limited to actions taken
by a formally recognized union.) Congress recognized that,
before the NLRA, “a single employee was helpless in dealing
6 No. 15-2997
with an employer,” and “that union was essential to give laborers
opportunity to deal on an equality with their employer.”
NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 33
(1937). In enacting the NLRA, Congress’s purpose was to “to
equalize the bargaining power of the employee with that of
his employer by allowing employees to band together in confronting
an employer regarding the terms and conditions of
their employment.” City Disposal Systems, 465 U.S. at 835.
Congress gave “no indication that [it] intended to limit this
protection to situations in which an employee’s activity and
that of his fellow employees combine with one another in any
particular way.” Id.
Collective, representative, and class legal remedies allow
employees to band together and thereby equalize bargaining
power. See Phillips Petrol. Co. v. Shutts, 472 U.S. 797, 809 (1985)
(noting that the class action procedure allows plaintiffs who
would otherwise “have no realistic day in court” to enforce
their rights); Harry Kalven, Jr. & Maurice Rosenfield, The Contemporary
Function of the Class Suit, 8 U. CHI. L. REV. 684, 686
(1941) (noting that class suits allow those “individually in a
poor position to seek legal redress” to do so, and that “an effective
and inclusive group remedy” is necessary to ensure
proper enforcement of rights). Given Section 7’s intentionally
broad sweep, there is no reason to think that Congress meant
to exclude collective remedies from its compass.
Straining to read the term through our most Epic-tinted
glasses, “concerted activity” might, at the most, be read as
ambiguous as applied to collective lawsuits. But even if Section
7 were ambiguous—and it is not—the Board, in accordance
with the reasoning above, has interpreted Sections 7 and
No. 15-2997 7
8 to prohibit employers from making agreements with individual
employees barring access to class or collective remedies.
See D. R. Horton, 357 N.L.R.B. No. 184, at *5. The Board’s
interpretations of ambiguous provisions of the NLRA are “entitled
to judicial deference.” Lechmere, Inc. v. NLRB, 502 U.S.
527, 536 (1992). This Court has held that the Board’s views are
entitled to Chevron deference, see Int’l Ass’n of Machinists &
Aerospace Workers v. NLRB, 133 F.3d 1012, 1015 (7th Cir. 1998),
and the Supreme Court has repeatedly cited Chevron in describing
its deference to the NLRB’s interpretation of the
NLRA, see, e.g., Lechmere, 502 U.S. at 536; NLRB v. United Food
& Commercial Workers Union, Local 23, AFL-CIO, 484 U.S. 112,
123 (1987). The Board’s interpretation is, at a minimum, a sensible
way to understand the statutory language, and thus we
must follow it.
Epic argues that because the Rule 23 class action procedure
did not exist in 1935, when the NLRA was passed, the
Act could not have been meant to protect employees’ rights to
class remedies. See FED. R. CIV. P. 23 (Committee Notes describing
the initial 1937 version of the rule and later amendments).
We are not persuaded. First, by protecting not only
employees’ “right to self-organization, to form, join, or assist
labor organizations, [and] to bargain collectively through representatives
of their own choosing” but also “other concerted
activities for the purpose of ... other mutual aid or protection,”
Section 7’s text signals that the activities protected are to be
construed broadly. 29 U.S.C. § 157 (emphasis added); see City
Disposal Systems, 465 U.S. at 835. There is no reason to think
that Congress intended the NLRA to protect only “concerted
activities” that were available at the time of the NLRA’s enactment.
8 No. 15-2997
Second, the contract here purports to address all collective
or representative procedures and remedies, not just class actions.
Rule 23 may have been yet to come at the time of the
NLRA’s passage, but it was not written on a clean slate. Other
class and collective procedures had existed for a long time on
the equity side of the court: permissive joinder of parties, for
instance, had long been part of Anglo-American civil procedure
and was encouraged in 19th-century federal courts.
CHARLES ALAN WRIGHT & ARTHUR R. MILLER, 7 FEDERAL
PRACTICE AND PROCEDURE § 1651 (3d ed. 2015) (noting that
federal equity courts encouraged permissive joinder of parties
as early as 1872). As early as 1853, it was “well established”
that representative suits were appropriate “where the
parties interested are numerous, and the suit is for an object
common to them all.” Smith v. Swormstedt, 57 U.S. 288, 302
(1853) (allowing representative suit on behalf of more than
1,500 Methodist preachers). In fact, representative and collective
legal procedures have been employed since the medieval
period. See STEPHEN C. YEAZELL, FROM MEDIEVAL GROUP
LITIGATION TO THE MODERN CLASS ACTION 38 (1987) (discussing
group litigation in England occurring as early as 1199
C.E.). The FLSA itself provided for collective and representative
actions when it was passed in 1938. See, e.g., Williams v.
Jacksonville Terminal Co., 315 U.S. 386, 390 n.3 (1942) (allowing
suits by employees on behalf of “him or themselves and other
employees similarly situated” (quoting FLSA, 29 U.S.C.
Congress was aware of class, representative, and collective
legal proceedings when it enacted the NLRA. The plain language
of Section 7 encompasses them, and there is no evidence
that Congress intended them to be excluded. Section 7’s
No. 15-2997 9
plain language controls, GTE Sylvania, 447 U.S. at 108, and
protects collective legal processes. Along with Section 8, it
renders unenforceable any contract provision purporting to
waive employees’ access to such remedies.
The question thus becomes whether Epic’s arbitration provision
impinges on “Section 7 rights.” The answer is yes.
In relevant part, the contract states “that covered claims
will be arbitrated only on an individual basis,” and that employees
“waive the right to participate in or receive money or
any other relief from any class, collective, or representative
proceeding.” It stipulates that “[n]o party may bring a claim
on behalf of other individuals, and any arbitrator hearing [a]
claim may not: (i) combine more than one individual’s claim
or claims into a single case; (ii) participate in or facilitate notification
of others of potential claims; or (iii) arbitrate any form
of a class, collective or representative proceeding.” It notes
that “covered claims” include any “claimed violation of wageand-hour
practices or procedures under local, state, or federal
statutory or common law.” It thus combines two distinct
rules: first, any wage-and-hour dispute must be submitted to
arbitration rather than pursued in court; and second, no matter
where the claim is brought, the plaintiff may not take advantage
of any collective procedures available in the tribunal.
Insofar as the second aspect of its provision is concerned,
Epic’s clause runs straight into the teeth of Section 7. The provision
prohibits any collective, representative, or class legal
proceeding. Section 7 provides that “[e]mployees shall have
the right to ... engage in ... concerted activities for the purpose
of collective bargaining or other mutual aid or protection.” 29
10 No. 15-2997
U.S.C. § 157. A collective, representative, or class legal proceeding
is just such a “concerted activit[y].” See Eastex, 437
U.S. at 566; Brady, 644 F.3d at 673; D. R. Horton, 357 N.L.R.B.
No. 184, at *2–3. Under Section 8, any employer action that
“interfere[s] with, restrain[s], or coerce[s] employees in the
exercise of the rights guaranteed in [Section 7]” constitutes an
“unfair labor practice.” 29 U.S.C. § 158(a)(1). Contracts that
stipulate away employees’ Section 7 rights or otherwise require
actions unlawful under the NRLA are unenforceable.
See Nat’l Licorice Co., 309 U.S. at 361; D. R. Horton, 357 N.L.R.B.
No. 184, at *5.
We are aware that the circuits have some differences of
opinion in this area, although those differences do not affect
our analysis here. The Ninth Circuit has held that an arbitration
agreement mandating individual arbitration may be enforceable
where the employee had the right to opt out of the
agreement without penalty, reasoning that the employer
therefore did not “interfere with, restrain, or coerce” her in
violation of Section 8. Johnmohammadi v. Bloomingdale's, Inc.,
755 F.3d 1072, 1077 (9th Cir. 2014). The Ninth Circuit’s decision
in Johnmohammadi conflicts with a much earlier decision
from this court, which held that contracts between employers
and individual employees that stipulate away Section 7 rights
necessarily interfere with employees’ exercise of those rights
in violation of Section 8. See NLRB v. Stone, 125 F.2d 752, 756
(7th Cir. 1942). Stone, which has never been undermined, held
that where the “employee was obligated to bargain individually,”
an arbitration agreement limiting Section 7 rights was a
per se violation of the NLRA and could not “be legalized by
showing the contract was entered into without coercion.” Id.
(“This is the very antithesis of collective bargaining.” (citing
NLRB v. Superior Tanning Co., 117 F.2d 881, 890 (7th Cir.
No. 15-2997 11
1940))). The Board has long held the same. See D.R. Horton,
357 N.L.R.B. No. 184, at *5–7 (citing J. H. Stone & Sons, 33
N.L.R.B. 1014 (1941) and Superior Tanning Co., 14 N.L.R.B. 942
(1939)). (In Johnmohammadi, the Ninth Circuit, without explanation,
did not defer to the Board.) We have no need to resolve
these differences today, however, because in our case, it
is undisputed that assent to Epic’s arbitration provision was
a condition of continued employment. A contract that limits
Section 7 rights that is agreed to as a condition of continued
employment qualifies as “interfer[ing] with” or “restrain[ing]
... employees in the exercise” of those rights in violation of
Section 8(a)(1). 29 U.S.C. § 157(a)(1).
In short, Sections 7 and 8 of the NLRA render Epic’s arbitration
provision unenforceable. Even if this were not the
case, the Board has found that substantively identical arbitration
agreements, agreed to under similar conditions, violate
Sections 7 and 8. See D. R. Horton, 357 N.L.R.B. No. 184; Murphy
Oil USA, Inc., 361 N.L.R.B. No. 72 (2014), enf’d in part and
granted in part, Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013
(5th Cir. 2015). We conclude that, insofar as it prohibits collective
action, Epic’s arbitration provision violates Sections 7 and
8 of the NLRA.
That would be all that needs to be said, were it not for the
Federal Arbitration Act. Epic argues that the FAA overrides
the labor law doctrines we have been discussing and entitles
it to enforce its arbitration clause in full. Looking at the arbitration
agreement, it is not clear to us that the FAA has anything
to do with this case. The contract imposes two rules: (1)
no collective action, and (2) proceed in arbitration. But it does
not stop there. It also states that if the collective-action waiver
12 No. 15-2997
is unenforceable, then any collective claim must proceed in
court, not arbitration. Since we have concluded in Part II of
this opinion that the collective-action waiver is incompatible
with the NLRA, we could probably stop here: the contract itself
demands that Lewis’s claim be brought in a court. Epic,
however, contends that we should ignore the contract’s saving
clause because the FAA trumps the NLRA. In essence,
Epic says that even if the NLRA killed off the collective-action
waiver, the FAA resuscitates it, and along with it, the rest of
the arbitration apparatus. We reject this reading of the two
In relevant part, the FAA provides that any written contract
“evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract
or transaction ... shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for
the revocation of any contract.” 9 U.S.C. § 2. Enacted in “response
to judicial hostility to arbitration,” CompuCredit Corp.
v. Greenwood, 132 S. Ct. 665, 668 (2012), its purpose was “to
make arbitration agreements as enforceable as other contracts,
but not more so.” Prima Paint Corp. v. Flood & Conklin
Mfg. Co., 388 U.S. 395, 404 n.12 (1967). Federal statutory claims
are just as arbitrable as anything else, unless the FAA’s mandate
has been ‘overridden by a contrary congressional command.’”
CompuCredit, 132 S. Ct. at 669 (quoting Shearson/American
Express Inc. v. McMahon, 482 U.S. 220, 226
(1987)). The FAA’s “saving clause permits agreements to arbitrate
to be invalidated by ‘generally applicable contract defenses,’
... but not by defenses that apply only to arbitration or
that derive their meaning from the fact that an agreement to
arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 563
No. 15-2997 13
U.S. 333, 339 (2011) (quoting Doctor’s Associates, Inc. v. Casarotto,
517 U.S. 681, 687 (1996)).
Epic argues that the NLRA contains no “contrary congressional
command” against arbitration, and that the FAA therefore
trumps the NLRA. But this argument puts the cart before
the horse. Before we rush to decide whether one statute eclipses
another, we must stop to see if the two statutes conflict at
all. See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515
U.S. 528, 533 (1995). In order for there to be a conflict between
the NLRA as we have interpreted it and the FAA, the FAA
would have to mandate the enforcement of Epic’s arbitration
clause. As we now explain, it does not.
Epic must overcome a heavy presumption to show that the
FAA clashes with the NLRA. “[W]hen two statutes are capable
of co-existence ... it is the duty of the courts, absent a
clearly expressed congressional intention to the contrary, to
regard each as effective.” Vimar Seguros, 515 U.S. at 533 (applying
canon to find FAA compatible with other statute)
(quoting Morton v. Mancari, 417 U.S. 535, 551 (1974)). Moreover,
“[w]hen two statutes complement each other”—that is,
“each has its own scope and purpose” and imposes “different
requirements and protections”—finding that one precludes
the other would flout the congressional design. POM Wonderful
LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2238 (2014) (internal
citations omitted). Courts will harmonize overlapping statutes
“so long as each reaches some distinct cases.” J.E.M. Ag
Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124, 144
(2001). Implied repeal should be found only when there is an
“‘irreconcilable conflict’ between the two federal statutes at issue.”
Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 381
14 No. 15-2997
(1996) (quoting Kremer v. Chem. Const. Corp., 456 U.S. 461, 468
Epic has not carried that burden, because there is no conflict
between the NLRA and the FAA, let alone an irreconcilable
one. As a general matter, there is “no doubt that illegal
promises will not be enforced in cases controlled by the federal
law.” Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 77 (1982).
The FAA incorporates that principle through its saving clause:
it confirms that agreements to arbitrate “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C.
§ 2. Illegality is one of those grounds. See Buckeye Check Cashing,
Inc. v. Cardegna, 546 U.S. 440, 444 (2006) (noting that illegality
is a ground preventing enforcement under § 2). The
NLRA prohibits the enforcement of contract provisions like
Epic’s, which strip away employees’ rights to engage in “concerted
activities.” Because the provision at issue is unlawful
under Section 7 of the NLRA, it is illegal, and meets the criteria
of the FAA’s saving clause for nonenforcement. Here, the
NLRA and FAA work hand in glove.
In D.R. Horton, Inc. v. NLRB, the Fifth Circuit came to the
opposite conclusion.† 737 F.3d at 357. Drawing from dicta that
first appeared in Concepcion, 563 U.S. at 348, and was then repeated
in American Express Co. v. Italian Colors Restaurant, 133
S. Ct. 2304, 2310 (2013), the Fifth Circuit reasoned that because
class arbitration sacrifices arbitration’s “principal advantage”
† Because this opinion would create a conflict in the circuits, we have
circulated it to all judges in active service under Circuit Rule 40(e). No
judge wished to hear the case en banc.
No. 15-2997 15
of informality, “makes the process slower, more costly, and
more likely to generate procedural morass than final judgment,”
“greatly increases risks to defendants,” and “is poorly
suited to the higher stakes of class litigation,” the “effect of
requiring class arbitration procedures is to disfavor arbitration.”
D.R. Horton, 737 F.3d at 359 (quoting Concepcion, 563
U.S. at 348–52); see also Italian Colors, 133 S. Ct. at 2312. The
Fifth Circuit suggested that because the FAA “embod[ies] a
national policy favoring arbitration and a liberal federal policy
favoring arbitration agreements,” Concepcion, 563 U.S. at
346 (internal quotation marks and citations omitted), any law
that even incidentally burdens arbitration—here, Section 7 of
the NLRA—necessarily conflicts with the FAA. See D.R. Horton,
737 F.3d at 360 (“Requiring a class mechanism is an actual
impediment to arbitration and violates the FAA. The saving
clause is not a basis for invalidating the waiver of class procedures
in the arbitration agreement.”).
There are several problems with this logic. First, it makes
no effort to harmonize the FAA and NLRA. When addressing
the interactions of federal statutes, courts are not supposed to
go out looking for trouble: they may not “pick and choose
among congressional enactments.” Morton, 417 U.S. at 551.
Rather, they must employ a strong presumption that the statutes
may both be given effect. See id. The savings clause of the
FAA ensures that, at least on these facts, there is no irreconcilable
conflict between the NLRA and the FAA.
Indeed, finding the NLRA in conflict with the FAA would
be ironic considering that the NLRA is in fact pro-arbitration:
it expressly allows unions and employers to arbitrate disputes
between each other, see 29 U.S.C. § 171(b), and to negotiate
collective bargaining agreements that require employees to
16 No. 15-2997
arbitrate individual employment disputes. See 14 Penn Plaza
LLC v. Pyett, 556 U.S. 247, 257-58 (2009); City Disposal Systems,
465 U.S. at 836–37. The NLRA does not disfavor arbitration; in
fact, it is entirely possible that the NLRA would not bar Epic’s
provision if it were included in a collective bargaining agreement.
See City Disposal Systems, 465 U.S. at 837. (“[I]f an employer
does not wish to tolerate certain methods by which employees
invoke their collectively bargained rights, [it] is free
to negotiate a provision in [its] collective-bargaining agreement
that limits the availability of such methods.”). If Epic’s
provision had permitted collective arbitration, it would not
have run afoul of Section 7 either. But it did not, and so it ran
up against the substantive right to act collectively that the
NLRA gives to employees.
Neither Concepcion nor Italian Colors goes so far as to say
that anything that conceivably makes arbitration less attractive
automatically conflicts with the FAA, nor does either case
hold that an arbitration clause automatically precludes collective
action even if it is silent on that point. In Concepcion, the
Supreme Court found incompatible with the FAA a state law
that declared arbitration clauses to be unconscionable for lowvalue
consumer claims. See Concepcion, 563 U.S. at 340. The
law was directed toward arbitration, and it was hostile to the
process. Here, we have nothing of the sort. Instead, we are
reconciling two federal statutes, which must be treated on
equal footing. The protection for collective action found in the
NLRA, moreover, extends far beyond collective litigation or
arbitration; it is a general principle that affects countless aspects
of the employer/employee relationship.
This case is actually the inverse of Italian Colors. There the
plaintiffs argued that requiring them to litigate individually
No. 15-2997 17
“contravene[d] the policies of the antitrust laws.” 133 S. Ct. at
2309. The Court rejected this argument, noting that “the antitrust
laws do not guarantee an affordable procedural path to
the vindication of every claim.” With regard to the enforcement
of the antitrust laws, the Court commented that “no legislation
pursues its purposes at all costs.” Id. (quoting Rodriguez
v. United States, 480 U.S. 522, 525–526 (1987) (per curiam)).
In this case, the shoe is on the other foot. The FAA does
not “pursue its purposes at all costs”—that is why it contains
a saving clause. Id. If these statutes are to be harmonized—
and according to all the traditional rules of statutory construction,
they must be—it is through the FAA’s saving clause,
which provides for the very situation at hand. Because the
NLRA renders Epic’s arbitration provision illegal, the FAA
does not mandate its enforcement.
We add that even if the dicta from Concepcion and Italian
Colors lent itself to the Fifth Circuit’s interpretation, it would
not apply here: Sections 7 and 8 do not mandate class arbitration.
Indeed, they say nothing about class arbitration, or even
arbitration generally. Instead, they broadly restrain employers
from interfering with employees’ engaging in concerted activities.
See 29 U.S.C. §§ 157, 158. Sections 7 and 8 stay Epic’s
hand. (This is why, in addition to its being waived, Epic’s argument
that Lewis relinquished his Section 7 rights fails.)
Epic acted unlawfully in attempting to contract with Lewis to
waive his Section 7 rights, regardless of whether Lewis agreed
to that contract. The very formation of the contract was illegal.
See Italian Colors, 133 S. Ct. at 2312 (Thomas, J., concurring)
(noting, in adopting the narrowest characterization of the
FAA’s saving clause of any Justice, that defenses to contract
formation block an order compelling arbitration under FAA).
18 No. 15-2997
Finally, finding the NLRA in conflict with the FAA would
render the FAA’s saving clause a nullity. See TRW Inc. v. Andrews,
534 U.S. 19, 31 (2001) (noting the “cardinal principle of
statutory construction that a statute ought, upon the whole,
to be so construed that, if it can be prevented, no clause, sentence,
or word shall be superfluous, void, or insignificant”).
Illegality is a standard contract defense contemplated by the
FAA’s saving clause. See Buckeye Check Cashing, 546 U.S. at
444. If the NLRA does not render an arbitration provision sufficiently
illegal to trigger the saving clause, the saving clause
does not mean what it says.
Epic warns us against creating a circuit split, noting that at
least two circuits agree with the Fifth. See Owen v. Bristol Care,
Inc., 702 F.3d 1050, 1052 (8th Cir. 2013) (rejecting argument
that there is inherent conflict between NLRA/Norris LaGuardia
Act and FAA); Sutherland v. Ernst & Young LLP, 726 F.3d
290, 297 n.8 (2d Cir. 2013) (rejecting NLRA-based argument
without analysis); Richards v. Ernst & Young, LLP, 744 F.3d
1072, 1075 n.3 (9th Cir. 2013) (noting “[w]ithout deciding the
issue” that a number of courts have “determined that they
should not defer to the NLRB's decision in D.R. Horton”). Of
these courts, however, none has engaged substantively with
the relevant arguments.
The FAA contains a general policy “favoring arbitration
and a liberal federal policy favoring arbitration agreements.”
Concepcion, 563 U.S. at 346 (internal quotation marks and citations
omitted). Its “substantive command” is “that arbitration
agreements be treated like all other contracts.” See Buckeye
Check Cashing, 546 U.S. at 447. Its purpose is “to make arbitration
agreements as enforceable as other contracts, but not
more so.” Prima Paint, 388 U.S. at 404 n.12 (holding that FAA’s
No. 15-2997 19
saving clause prevents enforcement of both void and voidable
arbitration contracts). “To immunize an arbitration agreement
from judicial challenge on” a traditional ground such as
illegality “would be to elevate it over other forms of contract—a
situation inconsistent with the ‘saving clause.’” Id.
(applying same principle to fraud in the inducement). The
FAA therefore renders Epic’s arbitration provision unenforceable.
Last, Epic contends that even if the NLRA does protect a
right to class or collective action, any such right is procedural
only, not substantive, and thus the FAA demands enforcement.
The right to collective action in section 7 of the NLRA is
not, however, merely a procedural one. It instead lies at the
heart of the restructuring of employer/employee relationships
that Congress meant to achieve in the statute. See Allen-Bradley
Local No. 1111, United Elec., Radio & Mach. Workers of Am. v.
Wis. Employ’t Relations Bd., 315 U.S. 740, 750 (1942) (“[Section
7] guarantees labor its ‘fundamental right’ to self-organization
and collective bargaining.” (quoting Jones & Laughlin Steel, 301
U.S. 1, 33)); D. R. Horton, 357 N.L.R.B. No. 184, at *12 (noting
that the Section 7 right to concerted action “is the core substantive
right protected by the NLRA and is the foundation
on which the Act and Federal labor policy rest”). That Section
7’s rights are “substantive” is plain from the structure of the
NLRA: Section 7 is the NLRA’s only substantive provision.
Every other provision of the statute serves to enforce the
rights Section 7 protects. Compare 29 U.S.C. § 157 with id.
§§ 151–169. One of those rights is “to engage in ... concerted
activities for the purpose of collective bargaining or other mutual
aid or protection,” id. § 157; “concerted activities” include
20 No. 15-2997
collective, representative, and class legal proceedings. See
Eastex, 437 U.S. at 566; Brady, 644 F.3d at 673; D. R. Horton, 357
N.L.R.B. No. 184, at *2–3.
The Supreme Court has held that “[b]y agreeing to arbitrate
a statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their resolution
in an arbitral, rather than a judicial, forum.” Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985). (Contrary to the Fifth Circuit’s assertion in D.R. Horton,
the Supreme Court has never held that arbitration does not
“deny a party any statutory right.” 737 F.3d at 357.)
Arbitration agreements that act as a “prospective waiver
of a party’s right to pursue statutory remedies”—that is, of a
substantive right—are not enforceable. Italian Colors, 133 S. Ct.
at 2310 (quoting Mitsubishi Motors, 473 U.S. at 637 n.19).
Courts routinely invalidate arbitration provisions that interfere
with substantive statutory rights. See, e.g., McCaskill v.
SCI Mgmt. Corp., 285 F.3d 623, 626 (7th Cir. 2002) (holding unenforceable
arbitration agreement that did not provide for
award of attorney fees in accordance with right guaranteed
by Title VII); Kristian v. Comcast Corp., 446 F.3d 25, 48 (1st Cir.
2006) (holding unenforceable arbitration provision precluding
treble damages available under federal antitrust law);
Booker v. Robert Half Int'l, Inc., 413 F.3d 77, 83 (D.C. Cir. 2005)
(holding unenforceable and severing clause in arbitration
agreement proscribing exemplary and punitive damages
available under Title VII); Hadnot v. Bay, Ltd., 344 F.3d 474, 478
(5th Cir. 2003) (same); Morrison v. Circuit City Stores, Inc., 317
F.3d 646, 670 (6th Cir. 2003) (holding unenforceable arbitra-
No. 15-2997 21
tion agreement that limited remedies under Title VII); Paladino
v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1062 (11th
Cir. 1998) (same).
Epic pushes back with three arguments, but none changes
the result. It points out the Federal Rule of Civil Procedure 23
simply creates a procedural device. We have no quarrel with
that, but Epic forgets that its clause also prohibits the employees
from using any collective device, whether in arbitration,
outside of any tribunal, or litigation. Rule 23 is not the source
of the collective right here; Section 7 of the NLRA is. Epic also
notes that courts have held that other employment statutes
that provide for Rule 23 class actions do not provide a substantive
right to a class action. See, e.g., Gilmer v. Interstate/Johnson
Lane Corp., 500 U.S. 20, 26 (1991) (Age Discrimination
in Employment Act (ADEA)); D.R. Horton, 737 F.3d at
357 (citing court of appeals cases for FLSA). It bears repeating:
just as the NLRA is not Rule 23, it is not the ADEA or the
FLSA. While the FLSA and ADEA allow class or collective actions,
they do not guarantee collective process. See 29 U.S.C.
§§ 216(b), 626. The NLRA does. See id. § 157. Epic’s third argument
is that because Section 7 deals with how workers pursue
their grievances—through concerted action—it must be
procedural. But just because the Section 7 right is associational
does not mean that it is not substantive. It would be odd
indeed to consider associational rights, such as the one guaranteed
by the First Amendment to the U.S. Constitution, nonsubstantive.
Moreover, if Congress had meant for Section 7 to
cover only “concerted activities” related to collective bargaining,
there would have been no need for it to protect employees’
“right to ... engage in other concerted activities for the
purpose of collective bargaining or other mutual aid or protection.”
29 U.S.C. § 157 (emphasis added).
22 No. 15-2997
Outcome: Because it precludes employees from seeking any class,
collective, or representative remedies to wage-and-hour disputes,
Epic’s arbitration provision violates Sections 7 and 8 of
the NLRA. Nothing in the FAA saves the ban on collective action.
The judgment of the district court is therefore AFFIRMED.