Apologies to Winston Churchill, but the conflict over the enforcement of arbitration agreements with class waivers has become an ongoing legal and ideological struggle. Some view individual arbitration as a quicker and less costly means to resolve employment disputes, while others believe it is a means to deprive employees of their legal rights.
Since 2012, the National Labor Relations Board (NLRB) has taken the position that arbitration agreements with class or collective action waivers deprive employees of their rights under Section 7 of the National Labor Relations Act (NLRA). That NLRB position ultimately provoked a federal circuit split that posed serious challenges to national and multistate employers.
Now, a potential resolution finally is in sight. On Jan. 13, 2017, the U.S. Supreme Court granted certiorari in three cases that should provide a means for the court to decide whether arbitration agreements with class and collective action waivers are enforceable under the Federal Arbitration Act (FAA), irrespective of the NLRA. The three cases were discussed here previously.
In May 2016, the U.S. Court of Appeals for the Seventh Circuit created the split with its decision in Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), which held that an arbitration agreement precluding collective arbitration or collective action violates Section 7 of the NLRA, 29 U.S.C. § 157, and is unenforceable under the FAA, 9 U.S.C. §§ 1 et seq. That put the Seventh Circuit squarely at odds with the Fifth, Second, Eighth, Ninth and Eleventh Circuits, which had previously held that the FAA’s policy of favoring arbitration overrides any concerted activity rights employees have to class or collective remedies.
In August, however, the Ninth Circuit joined the Seventh Circuit and held in Morris v. Ernst & Young U.S. LLP, 834 F.3d 975 (9th Cir. 2016), that despite the FAA, under Section 7 employees have substantive rights to pursue collective relief that cannot be waived in an arbitration agreement.
During September and October 2016, certiorari petitions were filed in Epic Systems and Morris, as well as in NLRB v. Murphy Oil, in which the NLRB sought review for the Fifth Circuit’s holding that Section 7 rights did not override the FAA’s arbitration enforcement command.
Last Friday, the Supreme Court granted certiorari in all three cases and consolidated them. Before the Court now is the scope of its 2011 holding in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which employers have relied upon to require that disputes be resolved through individual arbitration. And doctrinally, the Court may be compelled to address its prior holding that statutory employment claims providing for collective treatment were subject to mandatory arbitration. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). The Court has not set a date for oral argument. We will continue to follow developments in these cases.
The Supreme Court, whether composed of eight or nine justices, appears poised to determine whether collective rights under Section 7 of the NLRA are somehow outside the bounds of collective action waivers contained in arbitration agreements enforced by the FAA.