Will Workers’ Class Actions Survive or Be Gone?

Will Workers’ Class Actions Survive or Be Gone?

By Arthur Bryant

While everyone waits to see how the election changes the Supreme Court, one thing is clear: workers’ rights hang in the balance. The Court is soon going to have to decide whether employers can use mandatory arbitration clauses in employment contracts to ban—and eliminate—workers’ collective and class actions.

Four cases now up for review raise that question. All involve employees claiming they were cheated out of overtime pay—and employers arguing they cannot be sued because mandatory arbitration clauses in their employment agreements prohibit collective and class actions.

Two federal circuits held employers can ban those actions. Two ruled they cannot. If the Court does not review any of these decisions, more are on the way. Suits raising the question are pending in five more federal courts of appeal.

The four cases now before the Court show the arguments and the issues.

In National Labor Relations Board v. Murphy Oil USA, Inc., the NLRB says the Fifth Circuit made an enormous mistake when it held the employer could use its mandatory arbitration clause to bar all workers at over 1,000 stores in 21 states from pursuing collective actions against it under the Fair Labor Standards Act and class actions in federal and state court. The clause says each worker has to proceed individually and alone.

The NLRB insists that violates section 7 of the National Labor Relations Act, which gives employees “the right to…engage in…concerted activities for the purpose of…mutual aid and protection.” The Supreme Court previously said these “concerted activities” include actions pursued in “administrative and judicial forums.” Because the NLRB is charged with enforcing America’s labor laws, its interpretation is entitled to substantial deference. That interpretation stresses the importance of what is at stake: “the right to engage in collective action – including collective legal action – is the core substantive statutory right protected by the NLRA and the foundation on which the Act and Federal labor policy rest.”

In Epic Systems Corporation v. Lewis, a suit under FLSA and Wisconsin law, the Seventh Circuit enforced that interpretation and invalidated the employer’s collective and class action ban. Epic maintains that ruling contravened the Supreme Court’s recent decisions in AT&T Mobility v. Concepcion and American Express Co. v. Italian Colors Restaurantbecause arbitration agreements must be “enforced according to their terms” unless the FAA’s mandate has been “overridden by a contrary federal command.” Since the NLRA contains no such command, Epic says, its mandatory arbitration clause prohibiting joint actions must be enforced.

In Morris v. Ernst & Young, LLP, the accounting firm advances the same argument. It says the Ninth Circuit should not have followed the Seventh Circuit’s decision in Epic, as the FAA effectively overrides the NLRA. In both cases, the courts rejected that assertion, finding no conflict between the statutes because the FAA’s savings clause says arbitration clauses are enforceable except “upon such grounds as exist at law or in equity for the revocation of any contract.” Since the NLRA exists “at law” and is grounds “for the revocation of any contract,” both courts held that, under the FAA’s savings clause, the employers’ concerted and class action bans cannot be enforced.

In Raymours Furniture Company, Inc., a collective and class action in the Second Circuit under FLSA and New York law, the plaintiff adds an important additional argument. Challenging the court’s decision enforcing the employer’s collective and class action ban, she, too, relies on the NLRA. But she also emphasizes the explicit terms of the Norris-La Guardia Act, enacted in 1932, seven years after the FAA. Sections 2 and 3 nullify “any undertaking or promise” that conflicts with workers’ rights to “be free from the interference, restraint, or coercion of employers” in pursuing “concerted activities for the purpose of…mutual aid or protection.” Section 3 says any such an undertaking or promise “shall not be enforceable in any court of the United States and shall not afford any basis for the granting of equitable or legal relief by any court.” Section 15 says, “All acts and parts of acts in conflict with the permissions of this chapter are repealed.” Quoting this language, Patterson argues that the FAA was “overridden by a contrary federal command” – in 1932, by the Norris-La Guardia Act.

One other point may be determinative: the distinction the NLRA is drawing between procedural and substantive rights.  In these cases, the NLRA argues, unlike in any previous case, the class action and collective bans violate the plaintiffs’ substantive rights: the “right to concerted action” created by Section 7 of the NLRA, “the NLRA’s only substantive provision.” They are, the NLRA emphasizes, like “contracts providing that employees can be fired on the basis of age contrary to the ADEA or will not be paid the minimum wage dictated by the FLSA.” That fact, the agency contends, ends the analysis: “This Court has never held that arbitration agreements may waive substantive rights or be given effect in contravention of the statutes that create and protect those rights.”

The NLRA is right. Workers’ class and collective actions should and must survive. Will they? We will see.

This post originally appeared on ACSblog, and is cross-posted with permission here. 

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