Legal Newsline

Wednesday, August 21, 2019

Manhattan Institute: NLRB's stance on class action waivers wrong

By Joe Dyton | Oct 26, 2016

WASHINGTON (Legal Newsline) - The National Labor Relations Board (NLRB) recently asked the U.S. Supreme Court to determine if arbitration agreements that prohibit employees from pursuing class or collective actions are unlawful under the National Labor Relations Act (NLRA) and unenforceable under the Federal Arbitration Act.

On Sept. 9, the NLRB asked the Supreme Court to review and reverse the U.S. Court of Appeals for the Fifth Circuit’s ruling that rejected the NLRB's decision that the aforementioned agreements unlawfully interfere with workers’ NLRA rights to engage in a concerted activity. 

While the Second and Eight circuits also rejected the NLRB's position, the Seventh and Ninth circuits supported the NLRB’s view.

On the other side, employers are filing Supreme Court petitions of their own in hopes of reversing the Seventh and Ninth circuit rulings, which means the court has its hands full with cases presenting the class and collective waiver issue. 

“I think in a normal situation, in other words, if we had a full, nine-member court, the Supreme Court would be pretty likely to hear this case,” Jim Copland, senior fellow at the Manhattan Institute and director of Legal Policy told Legal Newsline

“We have a situation where a circuit is coming out with a holding in the circuit and the NLRB is saying, ‘We’re not going to acquiesce in that holding.’ (But) because of the eight-member court, I think it’s questionable what they will grant because there’s the chance that it’ll be a 4-4 split. It’s a tricky situation.”

Currently, employment arbitration agreements often contain class action waivers and employers would want to hold on to those agreements. The Consumer Financial Protection Bureau is attempting to pass a rule that would prohibit those class action waivers.

The current circuit split on the waivers has put businesses in an “unworkable” situation in which they’re unsure about the enforceability of the waivers, according to Robert F. Friedman, Littler Mendelson P.C.’s Dallas office shareholder and co-chair of the firm’s Alternative Dispute Resolution Practice Group.

A Supreme Court Ruling in favor of the NLRB’s position would be a big loss for employers, as they wouldn’t be able to enforce class action waivers against the non-supervisory employees they covered. There’s also a chance the number of class or collective actions in employment cases could increase.

On the employees’ side of things, they turn to the NLRA, which grants employees the right to engage in collective action to improve wages, hours and working conditions. If employers can require their employees to sign away their rights to engage in such activity, those statutory rights, “don’t mean very much,” according to Christine O’Brien, an attorney and labor and employment law professor at Boston College’s Carroll School of Management.

Copland said he thinks the NLRB's stance is wrong.

“The Federal Arbitration Act is a broad grant of authority to private parties to contract for arbitration and presumptively enforceable; the Supreme Court has clarified that that’s the case in both consumer contracts and Anti-Trust context in a pair of decisions," Copland said. 

"I don’t see any reason why the administrative agencies should be able to override the broad statutory requirement of the Federal Arbitration Act.”

Copland doesn’t believe the NLRB's actions will have too much impact on the CFPB’s proposal and vice versa.

“My guess would be that a holding in this case would not necessarily affect the consideration of the CFPB rule-making, so I don’t think it’ll control that outcome, but I do think it’s a parallel situation,” he said. 

“I think at the end of the day, the CFPB and NLRB are both wrong, but they’ll be decided somewhat different in terms of analysis the courts will use.”

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Organizations in this Story

Consumer Financial Protection Bureau Manhattan Institute