© 2017 The Texas Lawbook.
By Ron Chapman, Jr. and Christopher C. Murray of Ogletree Deakins
(Oct. 3) – On Monday, the Supreme Court of the United States heard oral argument in three consolidated cases that will decide the future of class action waivers in the employment context. The cases kicked off the Court’s new term and will likely be the most important employment cases to be decided in the coming year.
The high court is poised to resolve a fierce dispute that has raged for nearly six years since the NLRB issued its controversial decision in D.R. Horton. In that case, the NLRB held for the first time that the National Labor Relations Act bans class action waivers in employment arbitration agreements.
Critics of the NLRB’s decision object that the labor law says nothing about class actions or other litigation procedures and that the NLRB defied the Federal Arbitration Act, which makes arbitration agreements enforceable according to their terms.
From 2012 to 2016, the overwhelming majority of federal and states courts rejected the NLRB’s position, including the Second, Fifth and Eighth Circuits. Although the Fifth Circuit refused to enforce the Board’s D.R. Horton decision, the NLRB adhered to its own position in dozens of subsequent Board cases, including Murphy Oil. This put the NLRB on a direct collision course with most courts, and employers are caught in the middle.
In 2016, the appeals courts for the Seventh and Ninth Circuits became the first federal appellate courts to side with the NLRB, followed by the Sixth Circuit in 2017.
The Supreme Court entered the fray earlier this year, granting certiorari in three cases — National Labor Relations Board v. Murphy Oil USA, Epic Systems Corp. v. Lewis and Ernst & Young v. Morris — and consolidating them for purposes of oral argument.
Dozens of amici filed briefs, including, most strangely, the United States represented by the Solicitor General, who opposes the NLRB’s position. This resulted in two government lawyers arguing on different sides of the issue during oral argument—the Assistant Solicitor General on behalf of the United States and the NLRB’s General Counsel on behalf of the NLRB.
Most of the current justices’ views on arbitration and class action waivers in arbitration are well known. The Court has issued a series of decisions in recent years affirming the enforceability of class action waivers in arbitration agreements under the Federal Arbitration Act, but none of the Court’s prior cases dealt specifically with employment arbitration or the National Labor Relations Act.
Most notably, the Court’s decisions in the area have been sharply split with many 5–4 votes. And the late Justice Antonin Scalia, who passed away in February 2016, was always in the majority of those decisions. His absence created the prospect of a 4–4 tie prior to Justice Neil Gorsuch joining the Court in April 2017.
Since his confirmation, all eyes have been on Justice Gorsuch for clues to his leanings. During the oral argument, Justice Gorsuch didn’t say a word, in stark contrast to his active questioning during oral arguments at the end of the Court’s last term.
Justices Stephen Breyer, Elena Kagan, Sonia Sotomayor, and Ruth Bader Ginsburg all offered vociferous and passionate advocacy in support of the NLRB and the employees, leaving observers with no doubt of their impression of the cases. In fact, Justice Breyer opined that class action waivers strike “at the heart of the New Deal” pro-worker regulations issued decades ago.
Chief Justice John Roberts and Justice Samuel Alito, on the other hand, posed questions that, while more subtle than the others’ questions, supported the employers’ arguments. Like Justice Gorsuch, Justice Clarence Thomas did not ask any questions or make any comments, which is his custom.
As with most divided cases at the Supreme Court these days, that leaves us with Justice Anthony Kennedy. On several occasions, Justice Kennedy made the point that other types of concerted action are still permitted under an arbitration agreement with class action waiver. For example, according to Justice Kennedy, employees can hire the same lawyer, advance the same evidence and collaborate in the prosecution of their claims.
As the NLRB’s General Counsel attempted to respond, Justice Breyer jumped in and provided what he thought was an an answer to Justice Kennedy’s question. Justice Kennedy then noted that Justice Breyer was answering a different question, stating again that employees can act concertedly without filing joint or class claims and suggesting that employers cannot be “constrained in the type of arbitration agreements they can have.”
In an apparent attempt to court Justice Kennedy’s vote, Justice Breyer twice floated the idea of issuing a narrow ruling holding the arbitration agreements at issue are unlawful because they prohibit two employees from filing their claims in a single proceeding, leaving for another day the question of whether a prohibition on class and collective actions filed by one individual also violates the NLRA. In response, Chief Justice Roberts suggested the issue is “more complicated” than that.
In general, the arguments advanced on both sides were the same that have existed since the NLRB’s D.R. Horton decision in January 2012. The only potential twist came from Chief Justice Roberts, who posed a hypothetical of an arbitration agreement that adopts the rules of an arbitral forum but does not contain a class action waiver. Chief Justice Roberts asked if the NLRA would be violated if the arbitral forum’s rules prohibited class actions or, for example, prohibited class actions unless more than 50 employees asserted the same claim.
The NLRB’s General Counsel conceded such a situation would not violate the NLRA because the prohibition on class actions would be coming from the arbitral forum and not the arbitration agreement imposed by the employer. Arguing separately but representing the same side, the attorney for the employees disagreed with that concession, displaying a rare division at the Supreme Court for parties that supposedly are aligned.
At this point, the only thing that is certain is that the Court is divided. That means the Court will issue at least two opinions, which will likely delay their release until at least January or February next year. Stay tuned.
Ron Chapman, Jr. is a shareholder in the Dallas office of Ogletree Deakins, an international labor and employment firm, and a member of the firm’s board of directors.
Chris Murray is a shareholder in the firm’s Indianapolis office.
Chapman, Jr. and Murray represented DR Horton in its successful attempt to persuade the Fifth Circuit to vacate the NLRB’s ban on class action waivers and currently represent employers in a dozen similar cases around the country. They also regularly assist employers in crafting and implementing arbitration agreements with class action waivers.
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