There are very straightforward reasons that labor unions and their members have argued that employees, whether they belong to a labor union or not, engage in protected concerted activity when they attempt to join together in a putative, or proposed, class action or collective action in connection with workplace disputes.

Some of those workplace disputes involve allegations that the employer has violated the Fair Labor Standards Act (“FLSA”) by not paying overtime and/or the minimum wage to employees who should have received those payments.  Or employees might bring a discrimination lawsuit based on conduct that applies to a group of employees.

Class actions or collective actions (the latter includes FLSA and federal age-discrimination claims) can be brought more efficiently, at less expense, than the same claims in multiple lawsuits.  In addition, the employer’s liability exposure is higher in a class or collective action.  Of course, that is why employers want to prevent employees from filing those lawsuits.  But no matter how understandable those employers’ motives may be, that does not justify their efforts to prevent employees from exercising their statutory right to engage in concerted activity for their mutual benefit.

That is why the three cases that the Supreme Court has decided to review are so important.  We do not know whether the employees’ position will win a majority of the Court, or whether a majority will find for the employers, or whether these cases will be affirmed on a 4-4 split vote.

In the meantime, Rep. Goodlatte has introduced HR 985, which has the ostensible purpose to “amend the procedures used in Federal court class actions and multidistrict litigation proceedings to assure fairer, more efficient outcomes for claimants and defendants, and for other purposes.”  The full text of that bill is not available on the Library of Congress Web site.  However, I have seen a draft of that bill.  That draft contains provisions that would limit the plaintiffs who could file class actions, impose burdensome new limits on the distribution of money in class actions, and restrict the amount of attorneys’ fees that could be recovered in class actions, among other things.

The right of the people to join together in class actions is under attack.  Keeping existing rights, and protecting employees from one-sided, unilaterally imposed limits on their ability to join together, will require hard work and pressure on Congress.  We can win this fight, but it won’t be easy.

The principal arguments for the Fifth Circuit’s position that the Federal Arbitration Act (“FAA”) preempts the National Labor Relations Act (“NLRA”) in this area are contained in that court’s earlier decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). Those arguments are that a prohibition on class-action waivers would discourage arbitration, contrary to the purpose of the FAA; that the NLRA does not expressly state that it overrules the FAA; and that modern class action practice began in 1966, more than 30 years after Congress enacted the NLRA.

That analysis ignores the fact that protection of employees’ right to engage in concerted activity is at the very heart of the NLRA.  The specific prohibitions in section 8(a) of the NLRA, 29 USC sec. 158(a), are based on the right to engage in concerted activity set forth in section 7 of the Act, 29 USC sec. 157.  The specific forum in which these employees want to engage in that concerted activity is different from the workplace settings specifically considered when Congress enacted the NLRA in 1935.  But the fact that the current struggles occur in a legal setting, rather than on the picket line, and use motions and briefs, not strikes, should make no difference.

The issue of class actions, in contrast, is peripheral to the FAA.  Many arbitration cases right now are class arbitrations.  A class arbitration takes more time and is procedurally more complex than an individual arbitration.  But a class arbitration for, say, 50 employees is more efficient than 50 individual arbitration cases.

The fact that the the text of the NLRA does not contain an explicit override of the FAA should make no difference.  Congress can be forgiven for not including any such provision in the NLRA, since the FAA states that it does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  9 USC sec. 1.  It is likely that Congress did not think the NLRA conflicted with a statute that said it didn’t apply to these contracts of employment.

In addition, labor unions and employers have long used arbitration as a means of resolving disputes under collective bargaining agreements.  However, those arbitration cases can involve what essentially are class claims, such as a dispute over an employer’s alleged failure to pay contractual wages to tens, or hundreds, or thousands of union member-employees.  It is disingenuous to claim that an employer can prohibit employees from filing a class arbitration, even while it participates in class arbitrations filed by those same employees’ labor union.

The fact that Rule 23 of the Federal Rules of Civil Procedure, which sets forth the procedures for class actions, did not contain those procedures until 1966 should make no difference.  That would be like arguing that the NLRA cannot prohibit an employer from forbidding its employees to discuss workplace issues via e-mail, since e-mail did not exist in 1935.  The specific method of concerted activity might be new, but the protections for concerted activity have been central to labor law for more than 80 years.

A fair reading of these two statutes should support the NLRB’s decisions in these cases.  However, it is not clear that such a fair reading will receive the approval of a majority of the current eight-justice Supreme Court.  And it is not clear just how any new Justice on that Court, whether it is Judge Neil Gorsuch or anyone else, would rule in these three cases.

Why is this important?  Tune in for Part IV.

What does the National Labor Relations Board (“NLRB or “the Board”) have to do with bans on class actions, created through agreements that some employers have imposed unilaterally on their employees?  The answer is quite a lot.

Section 7 of the National Labor Relations Act (“NLRA”), 29 U.S.C. sec. 157, prohibits employers from interfering with, coercing or restraining their employees from engaging in “concerted activities for the purpose of … mutual aid or protection.”  Those protections are not limited to just unionized employees or to employees’ activities in the workplace.  In a series of cases, federal appeals courts have held that sec. 7 also grants employees the right to band together to file a lawsuit to achieve more favorable terms or conditions of employment.

The NLRB decided, during the Obama Administration, that class action bans — which require covered employees to file employment-related lawsuits individually, rather than filing cases with multiple plaintiffs or  class or collective actions — violate sec. 7 of the NLRA.  The Supreme Court has decided to hear three cases that raise that issue.  Those cases are NLRB v. Murphy Oil USA, Inc.; Epic Systems Corp. v. Lewis; and Ernst & Young LLP v. Morris.  The appeals court decisions in those cases are split.  The Seventh and Ninth Circuits upheld the Board’s position in the Epic Systems and Ernst & Young cases, while the Fifth Circuit ruled for the employer in the Murphy Oil case.

The Murphy Oil decision doesn’t contest the logic that a ban on class actions interferes with employees’ right to engage in concerted activity.  Instead, its decision is based mainly on those judges’ conclusion that the NLRA is not different in kind from other statutes, such as the Age Discrimination in Employment Act at issue in Gilmer, “that that have been found to give way to requirements of arbitration.”  That decision viewed the right to file a class action, or the similar procedure of a “collective action” in wage/hour or age discrimination cases, is just a “procedural device,” not a substantive right.

The Supreme Court granted certiorari — that is, it decided to review — these three cases on Jan. 13, 2017.  Even if Judge Gorsuch is confirmed as a Supreme Court justice, it is not clear whether he would be able to participate in the oral argument and in the decision in these cases.  In the next part of this multi-part post, I will discuss the reasons why I believe that the Court should affirm the NLRB’s decisions in these cases.

The U.S. Supreme Court has granted certiorari — which means it has decided to review — three cases that raise the question of whether an employer violates the National Labor Relations Act (“NLRA”) by prohibiting its employees from filing a class action or a collective action, generally as part of a scheme of forced arbitration.  This requires extended discussion, more than I can include in a single post.

For decades, the Supreme Court has approved the use of arbitration as a way of settling labor-management disputes.  This is separate from the scheme involved in the cases now before that court.  In fact, unionized employees enjoy greater protection against the use of arbitration to ban class actions than non-unionized employees.

Congress enacted the Federal Arbitration Act (“FAA”), 9 U.S.C. secs. 1, et seq., in 1925.  That statute makes any “written provision in … a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction” enforceable.  9 U.S.C. sec. 2.  However, that statute provides that it does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  9 U.S.C. sec. 1.

The Supreme Court decided, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), that the Age Discrimination in Employment Act does not bar employers from requiring arbitration of disputes arising under that statute.  And one decade later, that court held that the FAA applies to employment contracts not covered by the specific exemptions for transportation workers.  Circuit City Stores v. Adams, 532 U.S. 105 (2001).

Many employers then unilaterally instituted policies requiring their employees to arbitrate any disputes arising out of their employment.  (That does not apply to arbitration provisions in union contracts, also known as collective bargaining agreements, since those agreements must be negotiated with labor unions and must be ratified by those unions’ members.)

Some employers then inserted language in those policies, barring employees from bringing multi-plaintiff cases or class or collective actions in arbitration or in court.  The Supreme Court, in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011), held that those class-action bans were enforceable.  Specifically, the court held that the FAA preempted California’s Discover Bank rule, which invalidated arbitration contracts that barred class actions, at least in consumer contracts in which one party used its superior bargaining power in drafting the agreement and in which each dispute involves a small amount of damages per person.

That’s where we thought the law was, until the National Labor Relations Board began ruling that such class-action bans violated employees’ rights under the National Labor Relations Act.  I will discuss those rulings in Part II of this blog post.