DOJ Argues Against Itself in Conflict over Arbitration Agreements and Class Action Waivers

By Kimberly A. Klimczuk - Skoler, Abbott & Presser, P.C.

September 20, 2017

“To waive or not to waive” is a rather simplistic version of the question that the U.S. Supreme Court is currently being faced with in the following cases: Epic Systems Corporation v. Lewis; Ernst & Young LLP et al v. Morris et al; and National Labor Relations Board v. Murphy Oil USA, Inc. et al.  These cases were consolidated because they all involve agreements, signed by individual employees and their employers, in which they have agreed to resolve work-related disputes through arbitration rather than in courts.  The reason this fell into the Supreme Court’s lap is because federal appellate courts disagree as to “[w]hether arbitration agreements that bar individual employees from pursuing work-related claims on a collective or class basis limit the employees’ right … to engage in ‘concerted activities’ in pursuit of their ‘mutual aid or protection,’… and whether such agreements are enforceable…”

The issue here is an apparent conflict between two federal laws: the Federal Arbitration Act (FAA), which allows employers and employees to waive their rights to file lawsuits in court and to instead agree to resolve all employment-related disputes through arbitration, and the National Labor Relations Act (NLRA), which provides employees the right to engage in “protected concerted activity” – i.e., to work together with other employees to improve terms and conditions of employment.  According to the National Labor Relations Board (NLRB), class or collective actions (lawsuits filed by groups of individuals) are a quintessential example of protected activity and, therefore, arbitration agreements with collective/class action waivers  violate the NLRA because they interfere with employees’ rights to engage in protected concerted activity.

Notably, the U.S. Department of Justice (DOJ) has weighed in on the matter – in favor of both the NLRB and the employer.  This odd bit of procedural history came as a result of the change in administrations: In September 2016, under the Obama Administration, the DOJ filed a petition in support of the NLRB arguing that “the ability to engage in concerted activities under the NLRA is not a mere procedural means for vindicating some other statutory right” but rather it is the foundation upon which the NLRA rests.  Then, only nine months later, in June 2017, the Trump Admnistration DOJ filed a brief arguing exactly the opposite, stating, “Nothing in the NLRA’s legislative history indicates that Congress intended to bar enforcement of arbitration agreements like those at issue here[]” and “[w]e do not believe that the Board… gave adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the FAA.”

The Supreme Court will hear oral argument on these cases on October 2, 2017 and will likely issue a decision by the end of the year.  Whatever the outcome, the Supreme Court’s decision will provide some long-awaited certainty to employers and their attorneys as to the enforceability of class action waivers.