Yesterday, May 21, 2018, the United States Supreme Court finally resolved a split among the federal circuit courts regarding whether the National Labor Relations Act (“NLRA”) prohibits businesses from requiring employees to sign arbitration agreements that waive their right to engage in a class action against their employer. Epic Systems Corp. v. Lewis (No. 16–285).
At issue were two federal laws that appear to conflict with one another. The NLRA guarantees employees’ right to to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection. Employees have a right to band together with their co-workers to discuss or protest employers’ wages, benefits, or other terms and conditions of employment.
On the other hand, the Federal Arbitration Act (“FAA”) requires courts to enforce agreements to arbitrate, including the terms of arbitration to which the parties agree. If the employee and employer agree that the employee cannot engage in a class action suit but, rather, must pursue a grievance individually, the FAA requires those terms to be enforced.
In 2012, the National Labor Relations Board (“NLRB”), in D.R. Horton, held that the NLRA trumped the FAA and ensured employees’ right to engage in class actions regardless of the terms of the arbitration agreement. The 7th and 9th courts of appeal affirmed the NLRB’s view. Other circuits disagreed and upheld the class action waivers.
In resolving the dispute, the Supreme Court held that the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . , and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Nowhere in the Act does it “mention class or collective action procedures or even hint at a clear and manifest wish to displace the” FAA. Because the NLRA was enacted after the FAA, the Court reasoned that Congress could have expressly limited the effect of the FAA on the NLRA when it drafted and passed the NLRA, but it did not. The Court concluded that for those reasons, the FAA’s provisions must be enforced which requires enforcement of arbitration agreements by their terms.
This is just one of several wins for business on the labor front in the new administration. Look for many more reversals of recent labor policy in the coming months and years.
If you have any questions on this or any other topic, please feel free to contact our office.