Seyfarth Synopsis: Congress has once again proposed legislation that would seek to ban mandatory workplace arbitration of employment claims, despite a string of United States Supreme Court decisions upholding arbitration and class/collective action waivers as a lawful and appropriate mechanism to resolve workplace disputes.

H.R. 7109, the Restoring Justice for Workers Act, was introduced by Representative Jerrold Nadler, D-N.Y., and Representative Bobby Scott, D-Va., with 58 Democratic co-sponsors. Similar legislation is expected to be introduced in the Senate by Senator Patty Murray, D-Wash, with eight Democratic co-sponsors. The proposed legislation would overturn the U.S. Supreme Court’s decision in Epic Systems, and would amend the National Labor Relations Act to specifically prohibit class and collective action waivers under a new “Section 8(a)(6).”

As proposed, the new law would prohibit any pre-dispute agreement requiring arbitration of employment disputes. The law also would prohibit post-dispute agreements to arbitrate, unless the agreement is obtained without coercion or condition of employment-related privilege or benefit. Employees entering into voluntary post-dispute agreements also must be made aware of their rights under what would be a new section of the National Labor Relations Act. That new section would make it an unfair labor practice to “enter into or attempt to enforce any [pre-dispute] agreement” that would bar or prohibit class or collective actions relating to employment, or to retaliate against any employee for refusing to promise not to pursue a class claim.

While there is no chance that this bill will move in the House of Representatives as currently comprised, it previews the legislation Democrats are likely to pursue if the House changes control next week. A bill like this could even put a narrowly-controlled Republican Senate to the test, as the perceived unfairness of pre-dispute mandatory arbitration has been the target of considerable media attention, social media campaigns, and as recently as yesterday — large-scale employee activism. As such, protecting mandatory arbitration of workplace disputes may be an issue on which even conservative legislators might waver.

Indeed, this is not Congress’ first attempt to ban workplace arbitration. Before the Supreme Court’s decision in Epic Systems, and as part of the #metoo movement, Congress introduced in December 2017, bi-partisan legislation ostensibly aimed at preventing employers from enforcing arbitration agreements of sexual harassment claims. That bill, “Ending Forced Arbitration of Sexual Harassment Act,” was introduced by Senator Kristen Gillibrand, D-NY (and attracted some Republic support), but was penned in a way that would actually ban workplace arbitration in its entirety. We figured it was an oversight at the time, as written in our blog, “Slow Down Congress: You Are About to Render the FAA Inapplicable to Employment Disputes (and Class Waivers), and You Probably Don’t Realize It.” Clearly, this week’s Halloween bill was no accident.

Most legislative action against workplace arbitration has centered on the idea of prohibiting arbitration of sexual harassment claims, and by extension all other Title VII claims. Among the earliest efforts begun in 2009, when — perhaps ironically — then-Senator Al Franken pursued the Arbitration Fairness Act, which sought to prohibit the mandatory arbitration of sexual harassment claims. While that legislation was not successful, Senator Franken’s efforts led to provisions in the Department of Defense Appropriations Act of 2010, which to this day prohibits contractors to the U.S. DoD, with limited exceptions, from requiring arbitration of Title VII claims (including sexual harassment claims). Under President Obama, the DoD prohibition was expanded by his Fair Pay and Safe Workplaces Executive Order on July 31, 2014, effective January 2016, to all federal contractors. President Trump, however, rescinded this EO shortly after taking office in late 2016.

Several state legislatures have sought to ban mandatory arbitration of sexual harassment claims. Washington, Maryland, and New York each passed laws that would prohibit mandatory arbitration of sexual harassment claims, but those laws are either explicitly or presumptively preempted by the Federal Arbitration Act. See our Client Alert on the New York Ban.

Facing increasing headwinds against mandatory arbitration of sexual harassment claims, several large companies have proactively and publicly declared that they will exempt sexual harassment claims from existing mandatory arbitration programs. Other companies also are considering more limited arbitration programs, such as mandatory arbitration and class waivers for wage-hour claims only. But the Halloween bill and other attempts to ban workplace arbitration altogether are also becoming more common following Epic. The California legislature passed a law that would have barred arbitration of any violation of the California Labor Code or the Fair Employment and Housing Act, but it was vetoed by Governor Brown on September 30, 2018. Governor Brown’s term ends this year, and on November 6th Californians will pick a new Governor of California to take office on January 7, 2019.

Kentucky also recently joined the fray. On September 27, 2018, the Kentucky Supreme Court, in Northern Kentucky Area Development District v. Snyder shot down a workplace arbitration agreement on the basis that a mandatory arbitration agreement for employment claims is prohibited by Kentucky law, and not preempted by the Federal Arbitration Act. Kentucky’s law prohibits any employer from requiring as a condition of employment an employee to “waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit…”. The Court ruled that the statute was not an anti-arbitration clause provision, but an anti-employment discrimination provision. Of course, calling arbitration a diminution of rights are “fightin’ words” to the U.S. Supreme Court, so we remain on the lookout for a cert petition.

For now, employers are staying the course. Many companies remain interested in implementing dispute resolution procedures and mandatory arbitration programs that would limit their exposure to class and collective actions. Most employers report faster and more efficient resolution of workplace grievances and concerns, with more ability to direct money and time to the resolution of real complaints, rather than simply to line the pockets of class action plaintiffs’ lawyers.