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Gutting Crucial Provision of Federal Labor Law that Protects Workers

Gutting Crucial Provision of Federal Labor Law that Protects Workers

By Spencer Wilson, Brayton-Thornton Attorney and
     Paul Bland, Senior Attorney

A few years ago, the National Labor Relations Board issued a landmark decision in a case called D.R. Horton, which found that an employer violated federal labor law by requiring its employees to sign an arbitration agreement banning class actions as a condition of employment.  This week, the U.S. Court of Appeals for the Fifth Circuit overturned the NLRB’s decision.  The decision is a disaster for employees – it is bad law, bad history, and bad policy.

The result in D.R. Horton v. NLRB may not have been unexpected, given the Supreme Court’s current love affair with mandatory arbitration, but the decision is still deeply disturbing.  Going back to the 1930s, America’s labor laws have sought to equalize the power of employers and workers by letting workers join together to pursue their common economic interest. 

America’s most important labor law is the National Labor Relations Act.  This Act, which governs all workers and not just those who are members of a union, guarantees workers the substantive right to band together and engage in “concerted activities” to ensure “mutual aid or protection.”  As the Fifth Circuit explained, this right to concerted activity helps “equalize bargaining power between employees and employers.”  The Fifth Circuit also recognized that concerted activities take many forms, including picketing, joining a union, and filing class or collective actions in court. 

The ideas behind unions and class actions are pretty similar – both let workers stick up for their rights without putting a big sign that says “Please Fire Me As an Example to Others” on their chests, because the workers can be protected by having representatives stand out front for them.

But the Fifth Circuit just undermined these protections with its decision in D.R. Horton, by putting another federal statute – the Federal Arbitration Act – above workers’ right to engage in concerted activities.  The FAA has been interpreted to require enforcement of most arbitration agreements.  But it shouldn’t have trampled the NLRA’s protection for workers to join together, because the Supreme Court has repeatedly held that arbitration is just a procedural device that allows people to resolve disputes in one forum (arbitration) instead of court.  As a result, the Supreme Court has said that arbitration clauses shouldn’t be enforced when they would make a worker forgo a substantive federal right. 

This rule that arbitration clauses cannot wipe away substantive statutory rights should have preserved workers’ rights to join together under the NLRA.  And what’s frustrating is that the logic of the Fifth Circuit seems to accept key facts that support that conclusion.  For example, the Court understood that the right of workers to engage in concerted activity in court is just like the right to picket or join a union.  Those rights have always been understood to be substantive rights—in  fact, they are the most important substantive rights in all of labor law.  Based on this understanding, if the Court had stuck with the logical ramifications of its own understanding of labor law, the Court should have upheld the NLRB’s decision.  Unfortunately, it didn’t do that. 

Where did the Court go wrong?  By focusing on other contexts, outside of the NLRA, where courts generally recognize that the right to bring class actions is merely procedural. 

The impact of this holding is enormous.  The NLRA is a broadly crafted law that protects tens of millions of American workers—not just those who belong to a union.  Now, employers can say to their workers, “We won’t hire you or employ you unless you give up your rights under this crucial 78-year-old statute.”  The labor laws don’t work so well if employers can just choose not to follow them.   

The Fifth Circuit has essentially refused to enforce the provisions of the NLRA that would place workers on equal footing with their employers.  This may serve the economic interests of the employer, but it is a devastating development for workers throughout America.