Elections matter. The government has disowned the basic rule of the NLRB's 2012 D.R. Horton rule that class action waiver agreements are illegal because they deny employees the statutory right to engage in concerted activities for mutual aid and protection. We won't need to wait until the President appoints two new Board members.
The government's about-face was announced in an amicus brief [PDF] filed at the US Supreme Court on June 16 in Epic Systems Corp v. Lewis (consolidated with NLRB v. Murphy Oil and Ernst & Young v. Morris). [Other briefs here]
Facts: A non-union employer requires its employees to agree that they will arbitrate work-related legal claims – but not on a collective or class basis. Employees attempt to litigate or arbitrate (in a class action or collective action) claimed violations of the Fair Labor Standards Act (FLSA).
In Murphy Oil, the US Solicitor General originally filed a petition for a writ of certiorari on behalf of the NLRB, defending the Board’s position. But now, "After the change in administration, the [Solicitor's] Office reconsidered the issue and has reached the opposite conclusion."
The government now argues that the Federal Arbitration Act's policy favoring enforcement of arbitration agreements is not overridden by the "ambiguous NLRA language" that the NLRB used in finding that class action waiver agreements are illegal.
Summary of the government's arguments:
- The FAA requires courts to enforce agreements to arbitrate federal claims unless the FAA's mandate has been overridden by a contrary congressional command or unless enforcing the parties' agreement would deprive the plaintiff of a substantive federal right.
- The FAA's presumption in favor of enforcing arbitration agreements may yield where "Congress itself" has overridden that presumption in another statute. A statutory authorization to pursue class actions in court for violations of particular federal laws – such as the FLSA, which is involved in these case – is insufficient to override the FAA's directive that agreements to arbitrate must be enforced.
- Plaintiffs' argument rests on the idea that the NLRA's recognition of a general right to engage in "concerted activities" confers greater rights to pursue FLSA claims collectively than does the FLSA itself. Nothing in the NLRA's legislative history indicates that Congress intended to bar enforcement of arbitration agreements like those at issue here.
- An agreement to arbitrate does not entail any surrender of substantive statutory rights. The arbitration agreements in these cases do not purport to authorize employer conduct that would violate the FLSA's wage-and-hour provisions, and they do not prevent a successful plaintiff from recovering (through arbitration) the full relief that a court could award for an FLSA violation.
- Enforcement of the arbitration agreements will not deprive plaintiffs of any substantive right under the NLRA. Although NLRA Section 7 confers important substantive rights to organize and to engage in collective bargaining, the arbitration agreements do not constrain plaintiffs' exercise of those rights.
- Even if using collective dispute resolution mechanisms for FLSA claims is included within Section 7's phrase "other concerted activities," it is a procedural right under the FLSA, and not a substantive NLRA right.
- The FAA's saving clause provides no sound basis for declining to enforce the parties' arbitration agreements. The Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), held that a state-law rule against enforcement of class action waivers contained in certain consumer contracts fell outside the saving clause. The same result should follow in the present cases.
- As one expects, the government's brief is nicely written. Indeed, many Supreme Court Justices might follow exactly the logic expressed in the brief.
- As interesting as it is that the government switched horses in mid-stream, don't expect that to have any impact on the Supreme Court Justices. In a statutory interpretation case such as this one, they each do the best they can to figure out Congress' intent. They don't care much about the intent of the Justice Department.
Oral argument in these cases will be in the Fall of 2017, with a decision expected in 2018.
[For recent decisions and pending employment law cases, see Supreme Court Watch.]