Why it matters

Not for the first time, the National Labor Relations Board (NLRB) has asked the U.S. Supreme Court to weigh in on whether the National Labor Relations Act (NLRA) bars arbitration agreements that prohibit employees from pursuing employment-related claims on a class or collective basis in any forum. The most recent writ of certiorari comes from a case out of the Fifth Circuit Court of Appeals. The NLRB argued that a national fitness chain’s employment agreements violated employees’ Section 7 right to engage in protected, concerted activity by requiring individual arbitration and foreclosing class or collective actions of any kind. An administrative law judge sided with the NLRB, following the D.R. Horton and Murphy Oil line of cases, but the Fifth Circuit reversed, siding with the employer. The Board’s petition to the Justices emphasized that the federal appellate panels are increasingly divided on the issue, with the Fifth Circuit on one side and the Seventh and Ninth Circuits agreeing with the Board. Given the split, it seems likely that the Court will grant cert on one of the cases sooner or later.

Detailed discussion

In 2011, the National Labor Relations Board (NLRB) issued a complaint alleging that 24 Hour Fitness violated the National Labor Relations Act (NLRA) by requiring employees to agree to resolve all employment-related disputes through individual arbitration. This waiver of class and collective actions ran contrary to employees’ Section 7 right to engage in protected, concerted activity, the NLRB alleged.

An administrative law judge (ALJ) agreed, leaning on the NLRB’s decision in D.R. Horton for support. That decision—followed by Murphy Oil—established the Board’s position that any employment agreement requiring the waiver of class or collective actions violated the NLRA.

The national fitness chain appealed and the NLRB affirmed. Even the use of an opt-out provision in 24 Hour Fitness’ employment agreement did not save it, the majority of the Board panel wrote.

The Fifth Circuit—which had already rejected the NLRB’s position in both D.R. Horton and Murphy Oil—granted the employer’s motion to reverse in a single-sentence order.

Undeterred, the Board filed a petition for a writ of certiorari to the U.S. Supreme Court, requesting yet again that the Justices take a stance on the issue. Specifically, the NLRB posed the question: “Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in ‘concerted activities’ in pursuit of their ‘mutual aid or protection,’ 29 U.S.C. 157, and are therefore unenforceable under the savings clause of the Federal Arbitration Act, 9 U.S.C. 2.”

The NLRB had already sought review from the Fifth Circuit’s Murphy Oil decision as well as a similar Second Circuit case while employers asked the high court to consider cases from the Seventh and Ninth Circuits, where the federal appellate panels embraced the Board’s position.

“There is a clear conflict in the courts of appeal regarding the validity, in light of the NLRA, of arbitration agreements that would preclude employees from pursuing class or collective actions that assert employment-related claims,” the Board wrote. Noting that it has already filed prior writs, the NLRB suggested that the Court hold the petition in 24 Hour Fitness pending the disposition of the other four petitions.

To read the NLRB’s writ of certiorari in NLRB v. 24 Hour Fitness, click here.