The NLRA: A Real Class Act

Transcription

1 The NLRA: A Real Class Act Employees Substantive NLRA Right to Pursue Concerted Legal Action Presented to the Midwinter Meeting of the American Bar Association Section of Labor and Employment Law Kohala Coast, Hawaii March 4, 2015 Angie Cowan Hamada Allison, Slutsky & Kennedy, P.C. 230 W. Monroe Street, Suite 2600 Chicago, IL (312) cowan@ask-attorneys.com

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3 Introduction At an increasing rate, job applicants and employees find themselves ordered to sign agreements waiving their right to pursue class and collective legal action against their employer or potential employer in any forum and agreeing to mandatory individual arbitration. When the alternative results in unemployment, the right to waive one s statutory rights is more like an ultimatum. Since the National Labor Relations Board ( NLRB or Board ) and the federal courts do not agree on the scope and legality of such waivers, it is safe to say that employees sign without fully understanding the rights they have waived. The National Labor Relations Act ( NLRA or Act ) is invoked in any waiver where an employee agrees to engage in collective or concerted legal action. Section 7 of the NLRA provides employees with the right to act together, in concert, for mutual aid and protection. 29 U.S.C To protect those rights, Section 8(a)(1) of the Act makes it an unfair labor practice for an employer... to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [S]ection U.S.C. 158(a)(1). Section 1 of the NLRA states that it is the policy of the United States to protect[] the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection. 29 U.S.C For decades, the NLRB and federal courts have interpreted Sections 1, 7 and 8(a)(1) of the Act as providing employees with a substantive right to pursue collective actions including legal actions. As emphasized by the Board in Murphy Oil, [t]he core objective of the National Labor Relations Act is the protection of workers ability to act in concert, in support of one another. 361 NLRB No. 72, Slip op. at 1, (October 28, 2014). In D.R. Horton, 357 NLRB No. 184 (2012), enf. denied in relevant part, 737 F.3d 344 (5th Cir. 2013), a case of first impression, the Board held that an employer violates the NLRA when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial. Murphy Oil, (Slip op. at 1). In D.R. Horton, the employer required all new and continuing employees to sign such agreements. The Board held that requiring employees to sign 1

4 mandatory individual arbitration agreements waiving their right to engage in concerted legal action in any forum violates Section 8(a)(1) of the Act. As discussed in more detail below, the Board also found that its holding did not conflict with the Federal Arbitration Act ( FAA ). In 2013, the Fifth Circuit reversed the Board s D.R. Horton decision. Rather than analyze the case as one arising under the NLRA, the Fifth Circuit primarily focused on whether the mandatory individual arbitration agreement at issue was enforceable pursuant to the Federal Arbitration Act ( FAA ). Evidently, decisions from other federal courts reveal that the Fifth Circuit is not alone in its disagreement with the Board s D.R. Horton decision. 1 The Supreme Court has not yet ruled on the issue of whether mandatory individual arbitration agreements violate the NLRA, and if they do, whether they are still enforceable under the FAA. Nevertheless, the Board revisited the issue of mandatory individual arbitration agreements in Murphy Oil, and in the face of adversity and the vast expansion of the FAA, a majority of the Board carefully and reasonably reaffirmed its D.R. Horton holding. By doing so, the Board is protecting employees rights guaranteed by the NLRA. With the Board providing a very detailed opinion in Murphy Oil, it is possible that the federal courts, including the Fifth Circuit, will give future cases regarding the intersection of the NLRA and the FAA a fresh look. I. The Fifth Circuit s D.R. Horton Decision In a 2-1 decision, the United States Court of Appeals for the Fifth Circuit held that mandatory arbitration agreements precluding employees from filing joint, class, or collective claims addressing their terms of employment and working conditions against their employers in any forum, and mandating individual arbitration for such claims, are enforceable under the FAA. While the Fifth Circuit agreed with the Board that the mandatory individual arbitration agreement at issue in D.R. Horton needed to clarify that employees retained their right to file unfair labor practice charges with the NLRB, it found that the mandatory agreement in that case was otherwise enforceable pursuant to the FAA. 2 1 See Murphy Oil, (Slip op. at 36, fn. 5) (listing court decisions mostly disagreeing with the Board). 2 In his dissent, Judge Graves endorsed the Board s D.R. Horton decision. As noted by the Board in Murphy Oil, Judge Graves agreed with the Board that the mandatory arbitration agreement interfered with the employees substantive rights under Sec. 7 of the NLRA; that there was no conflict between the NLRA and the FAA, given that statute s savings clause; and that if there were a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act indicated that the FAA would have to yield. D.R. Horton, 737 F.3d, at Murphy Oil, (Slip op. at 7, fn 37). 2

5 Finding that the FAA governs the mandatory agreements at issue in D.R. Horton, the Fifth Circuit dismissed any potential application of the NLRA to the agreements at issue. The court acknowledged that cases under the NLRA give some support to the Board s analysis that collective and class claims, whether in lawsuits or in arbitration, are protected by Section 7. D.R. Horton, 737 F.3d at 357, fn 8. It also recognized that there is currently no Supreme Court jurisprudence analyzing Section 7 rights and the FAA. Yet, citing cases involving various employment laws not the NLRA, the court asserted that the use of class action procedures is not a substantive right protected by the NLRA. In doing so, the court also dismissed the Board s argument that the NLRA is sui generis. 3 Id. at 357. Rather than giving the NLRA and FAA the same consideration, an analysis typically utilized when considering a case invoking multiple federal laws, the Fifth Circuit simply applied a test established by the Supreme Court in non-nlra cases to determine if FAA arbitration agreements are enforceable. Id. at 358. The Supreme Court s FAA test starts with the assumption that FAA arbitration agreements are enforceable, 4 with two limited exceptions: (1) an arbitration agreement may be invalidated on any ground that would invalidate a contract under the FAA s savings clause 5 ; and (2) application of the FAA may be precluded by another statute s contrary congressional command. 6 Id. at 358. The Fifth Circuit held that the FAA s savings clause did not apply in this case because the Board s application of the savings clause would have the effect of disfavoring arbitration since [r]equiring a class mechanism is an actual impediment to arbitration. 7 Id. at In relying on decisions regarding collectively bargained arbitration agreements, 9 the court held that there was no inherent conflict between the FAA and NLRA because courts repeatedly have understood the NLRA to permit 3 In its Murphy Oil decision, the Board explained that the NLRA is sui generis because unlike other federal employment laws, such as the FLSA or ADEA, that provide a private right of action for claimants to vindicate their rights under the applicable law, the heart of the NLRA is the right to engage in concerted activity. (Slip Op. at 8). 4 Citing CompuCredit Corp. v. Greenwood, U.S., 132 S.Ct. 665, (2012). 5 9 U.S.C. 2; citing AT&T Mobility LLC v. Concepcion, U.S. 131 S.Ct. 1740, 1746 (2011). 6 Citing CompuCredit, supra, 132 S.Ct. at The Board has explicitly stated that it does not require class or collective actions in court or arbitration. Rather, employees should have the right to collectively pursue such actions. It is then up to the courts or the arbitrator to decide whether to certify a class. The Act, of course, does not create an entitlement to class certification or the equivalent; it protects the right to seek that result. Murphy Oil, (Slip op. at 10) (emphasis in original). 8 Murphy Oil, (Slip op. at 8), citing, D.R. Horton, 737 F.3d at citing 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, (2009)(finding that a collective bargaining agreement s arbitration provision must be honored unless the ADEA removes such claims from the NLRA s scope); Blessing v. Freestone, 520 U.S. 329, 343 (1997)( [W]e discern [] in the structure of the [NLRA] the very specific right of employees to complete the collective-bargaining process and agree to an arbitration clause. ). 3

6 and require arbitration. D.R. Horton, 737 F.3d at 361. With no substantive reasoning provided, the court did not consider the Norris-LaGuardia Act, 29 U.S.C. 101 et seq., and it dismissed the Board s interpretation of the Norris-LaGuardia Act claiming that the Norris-LaGuardia Act was outside of the Board s jurisdiction. 10 D.R. Horton, 737 F.3d at 362, fn. 10. A. Avoiding a Circuit Split The Fifth Circuit noted that other circuits the Second, Eighth and Ninth Circuits -- disagree with the Board s holding in D.R. Horton, and stated that it did not want to create a circuit split. D.R. Horton, 737 F.3d at 362. However, this reasoning misconstrues the findings in some of the other appellate court cases. For instance, in Richards v. Ernst & Young, LLP, 744 F.3d 1072 (9th Cir. 2013), the Ninth Circuit declined to address an argument predicated in D.R. Horton as untimely raised, but noted other courts disagreement with the Board s decision. In D.R. Horton, the Fifth Circuit cited the original Richards decision at 734 F.3d 871 as rejecting D.R. Horton. However, the Ninth Circuit amended its original decision stating that it specifically refrained from deciding the D.R. Horton issue. Richards, supra, 744 F.3d at 1075 & fn 3 (amended decision); Murphy Oil, (Slip op. at 2 (fn14), 11). In Sutherland v. Ernst & Young LLP, 726 F.3d 290, , fn. 8 (2d Cir. 2013), the Second Circuit, in a mere footnote, simply endorsed the Eighth Circuit s decision in Owen v. Bristol Care, Inc., 702 F.3d 1050, (8th Cir. 2013). At the time the Fifth Circuit issued its decision, the Eighth Circuit was the only other Circuit that analyzed the NLRA s applicability to mandatory individual arbitration agreements. The Eighth Circuit s analysis was not in the context of reviewing a Board decision upon appeal. Instead, the Eighth Circuit addressed an appeal from a district court s holding regarding a motion to compel individual arbitration of an FLSA lawsuit. In Owen v. Bristol Care, Inc., 702 F.3d 1050, (8th Cir. 2013), the Eighth Circuit rejected the argument that the NLRA s legislative history did not indicate a congressional command to override the FAA. The Eighth Circuit rejected the Board s D.R. Horton holding, stating that it owed no deference to the Board s reasoning. 702 F.3d at The Eighth Circuit also rejected the argument that the mandatory individual arbitration agreement violated the Norris-LaGuardia Act because the 1947 decision to reenact the FAA 10 Congress had declared in the Norris-LaGuardia Act [29 U.S.C. 101 et seq.] that individual agreements restricting employees concerted activities for the purpose of... mutual aid or protection expressly including concerted legal activity violated federal policy and were unenforceable. Murphy Oil, (Slip op. at 1). 4

7 suggests that Congress intended its arbitration protections to remain intact even in light of the earlier passage of three major labor relations statutes. 702 F.3d at The FAA was originally enacted in 1925, the Norris-LaGuardia Act in 1932, and the NLRA in The FAA was reenacted in 1947 as it was codified as Title 9 of the U.S. Code, but that action was not substantive. Murphy Oil, (Slip op. at 11). Under established canons of statutory construction, it will not be inferred that Congress, in revising and consolidating the laws, intended to change their effect unless such intention is clearly expressed. Murphy Oil, (Slip op. at 11), quoting Finley v. U.S., 490 U.S. 545, 554 (1989), quoting Anderson v. Pacific Coast S.S. Co., 225 U.S. 187, 199 (1912). As the Board pointed out, [i]t seems inconceivable that legislation effectively restricting the scope of the Norris-LaGuardia Act and the NLRA could be enacted without debate or even notice, especially in 1947, when those labor laws were both relatively new and undeniably prominent. Murphy Oil, (Slip op. at 11). 11 II. Murphy Oil: D.R. Horton Reaffirmed In a 3-2 decision, the NLRB reaffirmed its D.R. Horton decision in Murphy Oil, 361 NLRB No. 72 (2014). In Murphy Oil, the Board considered the Fifth Circuit s D.R. Horton decision, and meticulously explained why the Fifth Circuit s holding was improper. A. The Collective Legal Action Wavier and the Charging Party s Contested Legal Action Murphy Oil, the owner of oil fueling stations in numerous states, imposed a mandatory individual arbitration agreement as a term and condition of employment, which states: Excluding claims which must, by statute or other law, be resolved in other forums, Company and Individual agree to resolve any and all disputes or claims each may have against the other which relate in any manner whatsoever as to [sic] Individual's employment, including but not limited to, all claims beginning from the period of application through cessation of employment at Company and any post-termination claims and all related claims against managers, by binding arbitration.... Disputes related to employment include, but are not limited to, claims or charges based upon federal or state statutes, including, but not limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, and any other civil rights statute, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act or other wage statutes, the WARN Act, claims based upon tort or contract laws or common law or any other federal or state or local law affecting employment in any manner whatsoever..... Individual understands that he/she will not be considered for employment by the Company unless he/she signs this Agreement. 11 See Posadas v. National City Bank, 296 U.S. 497, 503 (1936) explaining that repeals [of federal legislation] by implication are not favored and that effect should be given to both statutes if possible. The Fifth Circuit noted that the enactment dates did not impact its decision. D.R. Horton, supra at

8 .... By signing this Agreement, Individual and the Company waive their right to commence, be a party to, or [act as a] class member [in, any class] or collective action in any court action against the other party relating to employment issues. Further, the parties waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum. The parties agree that any claim by or against Individual or the Company shall be heard without consolidation of such claim with any other person or entity's claim..... INDIVIDUAL AND COMPANY UNDERSTAND THAT, ABSENT THIS AGREEMENT, THEY WOULD HAVE THE RIGHT TO SUE EACH OTHER IN COURT, TO INITIATE OR BE A PARTY TO A GROUP OR CLASS ACTION CLAIM, AND THE RIGHT TO A JURY TRIAL, BUT, BY EXECUTING THIS AGREEMENT, BOTH PARTIES GIVE UP THOSE RIGHTS AND AGREE TO HAVE ALL EMPLOYMENT DISPUTES BETWEEN THEM RESOLVED BY MANDATORY, FINAL AND BINDING ARBITRATION. ANY EMPLOYMENT RELATIONSHIP BETWEEN INDIVIDUAL AND COMPANY IS TERMINABLE AT-WILL, AND NO OTHER INFERENCE IS TO BE DRAWN FROM THIS AGREEMENT. (Slip op. at 3-4). Murphy Oil revised the Agreement by burying the following language between the eighth and ninth paragraphs of the original Agreement: Notwithstanding the group, class or collective action waiver set forth in the preceding paragraph, Individual and Company agree that Individual is not waiving his or her right under Section 7 of the National Labor Relations Act ( NLRA ) to file a group, class or collective action in court and that Individual will not be disciplined or threatened with discipline for doing so. The Company, however, may lawfully seek enforcement of the group, class or collective action waiver in this Agreement under the Federal Arbitration Act and seek dismissal of any such class or collective claims. Both parties further agree that nothing in this Agreement precludes Individual or the Company from participating in proceedings to adjudicate unfair labor practices charges before the National Labor Relations Board ( NLRB ), including, but not limited to, charges addressing the enforcement of the group, class or collective action waiver set forth in the preceding paragraph. (Slip op. at 4). In Murphy Oil, employee Sheila Hobson, the Charging Party, signed the unrevised Agreement when applying for employment at Murphy Oil in Two years later, Hobson, along with three other employees, collectively filed a lawsuit against Murphy Oil under the Fair Labor Standards Act ( FLSA ) alleging that Murphy Oil failed to pay her and others for workrelated activities performed off the clock. In response, the Company filed a motion to compel individual arbitration, and Hobson then filed an unfair labor practice charge with the NLRB alleging that the Agreement violated the Act. The court upheld Murphy Oil s motion to dismiss, and the NLRB s General Counsel issued a complaint against the company. The Board held that [t]he Agreement limits the resolution of all employment-related disputes to binding individual arbitration, and provides that any claim shall be heard without consolidation of such claim with any other person or entity's claim. The Agreement thus clearly 6

9 and expressly bars employees from exercising their Section 7 right to pursue collective litigation of employment-related claims in all forums. Murphy Oil, (Slip op. at 18) (emphasis in original). In finding that the revised language did not cure the unfair labor practice, the Board explained that: While [the Revised Agreement] states that employees do not waive their Section 7 right to file a group, class or collective action in court and will not be disciplined or threatened with discipline if they do so, the Revised Agreement leaves intact the entirety of the original Agreement, under which employees explicitly waive their right to commence, be a party to, or [act as a] class member [in, any class] or collective action, and to commence or be a party to any group, class or collective action claim in arbitration or any other forum. And the Revised Agreement goes on to state that the Respondent may seek enforcement of the group, class or collective action waiver... and seek dismissal of any such class or collective claims. This additional language makes clear that the Revised Agreement does not negate the Agreement's provisions waiving all rights to litigate employment-related disputes concertedly. Employees would thus reasonably read the Revised Agreement as merely stating that the Respondent will not retaliate against them if they file a class or collective action. The right to commence, be a party to, or [act as a] class member in the action itself remains waived. Murphy Oil, (Slip op. at 19). B. Concerted Activity is a Substantive Right Under the NLRA The foundation of the Board s Murphy Oil decision is embedded in the maxim that employees Section 7 right to engage in concerted activity for mutual aid or protection is a substantive right. The NLRA does not explicitly state that the rights enumerated in Section 7 are substantive, but it is clear from the plain language and jurisprudence interpreting that language that Section 7 rights are in fact substantive, and not merely procedural rights. Substantive rights, as noted by the Supreme Court, are unwaivable statutory rights, and such rights are essential, critical, and principal aspects of the statutory scheme. Deference and the Federal Arbitration Act, Note, 128 Harv. L. Rev. 907 (Jan. 12, 2015), citing CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, (2012). Generally, [p]rocedural rules govern the manner and means by which the litigants rights are enforced, and substantive rights alter the rules of the decision by which the court will adjudicate those rights. Michael D. Schwartz, Note, A Substantive Right to Class Proceedings: The False Conflict Between the FAA and NLRA, 81 FORDHAM L. REV. 2945, (2013). Employees right to engage in concerted activity is an essential, critical and principal aspect of the NLRA. 7

10 In Emporium Capwell Co. v. Western Addition Community Organization, 420 U.S. 50, 62 (1975), the Supreme Court held that Section 7 rights are, for the most part, collective rights, rights to act in concert with one s fellow employees. Employees concerted activity is generally protected if it is for each other s mutual aid and protection, including the improvement of their working conditions. Protected concerted activity includes a wide range of activity from largescale actions like picketing, boycotts, and strikes, to more mundane, yet no less critical, activity such as employees conversations with their employer or among themselves about their terms and conditions of employment. Murphy Oil, (Slip op. at 8). The right to engage in concerted activity is at the heart of the NLRA. On the other hand, most federal employment laws, including the Fair Labor Standards Act (29 U.S.C. 216(b) and the Age Discrimination in Employment Act ( ADEA, 29 U.S.C. 621 et seq.), establish private rights of action that are ancillary to the main purpose of the Act. Under those Acts, group litigation is a procedure that can be used as a means to vindicate individual rights. Id. at 8. In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991), the Supreme Court ruled that language in the ADEA providing for the right to possibly pursue a class action lawsuit was not a substantive right to class procedures under the ADEA. Rather, the ADEA language regarding class procedures is a procedural means to vindicate the ADEA s substantive right: discriminatory action based on age. Id. [T]he National Labor Relations Act is not simply another employment-related statute. [I]t is protection for joint employee action that lies at the heart of the Act. Murphy Oil, (Slip op. at 8). 12 If employers restrict or prohibit employees from engaging in concerted activity unquestionably a right under the Act they violate Section 8(a)(1) of the Act. In analyzing such cases, the Board and the courts upon appeal look at the employees concerted activity to determine if their rights under the Act have been violated. As the Board noted, Section 7 does not create procedural rights. Murphy Oil, (Slip op. at 8). Instead, the means by which the substantive right to engage in concerted action are enforced constitute the procedural aspects of the NLRA. While other Federal employment statutes create procedural rights and private rights of action, Section 7 of the Act does not. Section 7 rights are enforced solely by the Board. Id. Section 10 of the Act specifies the procedures by which the 12 citing Meyers Industries, 281 NLRB 883, 883 (1986) (Meyers II), affd. sub nom., Prill v. NLRB, 835 F.2d 1481 (D.C. Cir. 1987), cert. denied, 487 U.S (1988). 8

11 Board enforces employees Section 7 rights. 29 U.S.C. 160; Murphy Oil, (Slip op. at 8). Section 10(a) states that the Board s authority shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, law, or otherwise. Id. at 8. Thus, the NLRA is unique and the Section 7 right to engage in concerted activity is a substantive right. Id. at 8. Reliance on jurisprudence regarding employment laws other than the NLRA or the Norris-LaGuardia Act to uphold mandatory individual arbitration agreements for employment claims as enforceable is therefore misguided. C. Concerted Activity Protected by the NLRA Includes the Substantive Right to Pursue Concerted Legal Action Since the right to engage in concerted activity under the Act is a substantive right, employees right to engage in collective legal action is also a substantive right. Murphy Oil, (Slip op. at 8). Just as employees can engage in concerted activity to strike, picket, sign a petition, or seek a consumer boycott to resolve a dispute with their employer, employees can engage in concerted legal activity. Id. There is no basis in the Act or its jurisprudence to carve out legal activity as somehow entitled to less protection than other concerted activity. Id. (emphasis in original). 13 In Eastex, Inc. v. NLRB, 437 U.S. 556, 564 (1978), the Supreme Court specifically stated that Section 7 protects employees when they seek to improve working conditions through resort to administrative and judicial forums... In Eastex, affirming the Board and the Fifth Circuit, the Supreme Court recognized that if the Act s protection of concerted activity did not protect employees actions when they sought to improve working conditions by resorting to administrative, judicial, or legislative forums, employees would be open to retaliation for much legitimate activity that could improve their lot as employees, which would frustrate the policy of the Act to protect the right of workers to act together to better their working conditions. 14 Id. at 567 n. 14. Indeed, the Board, for the past 60 years, has consistently held that filing a collective action or class action under state or federal wage and hour laws is activity protected by Section 13 See NLRB v. City Disposal Systems, Inc., 465 U.S. 822, (1984), upholding a Board rule that individual employee s assertion of rights under a collective bargaining agreement was protected concerted activity. After tracing the origins of Section 7, the Court observed [t]here is no indication that Congress intended to limit this protection to situations in which an employee s activity and that of his fellow employees combine with another in any particular way. Murphy Oil, (Slip op. at 10). 14 Eastex involved concerted support for minimum wage legislation. 9

12 7. 15 Conversely, the Fifth Circuit and the dissenting opinions in Murphy Oil, disagree that the right to engage in collective legal action is a substantive right that the NLRA intended to protect. Such views violate[] the long-established understanding of the Act and national labor policy... Murphy Oil, (Slip op. at 7). The Fifth Circuit noted that Board precedent and some circuit courts have held that [Section 7] protects collective-suit filings. D.R. Horton, 737 F.3d at The Fifth Circuit then acknowledges that [t]hese cases under the NLRA give some support to the Board s analysis that collective and class claims, whether in lawsuits or arbitration, are protected by Section 7. Id. at 357. But then the court dismisses that precedent stating that [c]aselaw under the FAA points us in a different direction than the course taken by the Board. Id. Citing cases interpreting the FLSA, ADEA and Rule 23 of the Federal Rules of Civil Procedure, the Fifth Circuit concluded that the use of class action procedures... is not a substantive right. Dismissing the Board s argument that the NLRA is sui generis, the Fifth Circuit stated [t]he Board distinguished such caselaw [regarding federal employment laws] on the basis that the NLRA is essentially sui generis. That Act s fundamental precept is the right for employees to act collectively.... Even so, there are numerous decisions holding that there is no right to use class procedures under various employment-related statutory frameworks. D.R. Horton, 737 F.3d at 357. The Board was clear that there is no Section 7 right to class certification. D.R. Horton, 357 NLRB No. 184 (Slip op. at 10) (2012). While the Act does not create a right to class certification or the equivalent, [i]t does create a right to pursue joint class or collective claims if and as available, without the interference of employer-imposed restraint. Murphy Oil, (Slip op. at 2). Employees may still decide to pursue litigation individually, and courts and arbitrators, not the Board, will decide whether requests for class certification are appropriate. However, under the Act, employees need to have the choice to pursue concerted legal claims regarding working conditions, and imposing a mandatory individual arbitration agreement as a condition of 15 D.R. Horton, 357 NLRB 184, *2 (2012), citing cases for collective actions: Spandsco Oil & Royalty Co., 42 NLRB 942, 949 (1942); Salt River Valley Water Users Association, 99 NLRB 849 (1952), enf d in relevant part, 206 F.2d 325 (9th Cir. 1953); Trinity Trucking & Materials Co., 221 NLRB 364 (1975), enf d mem., 567 F.2d 391 (7th Cir. 1977); Le Madri Restaurant, 331 NLRB 269, 275 (2000); cases cited for class actions: Harco Trucking, LLC, 344 NLRB 478, 481 (2005); United Parcel Service, 252 NLRB 1015 (1980), enf d, 677 F.2d 421 (6th Cir. 1982). 10

13 employment strips employees of their Section 7 right to make and act on that decision. D. The Right to Pursue Concerted Legal Action is Not Waivable Employees cannot waive their substantive rights under the Act through a mandatory individual arbitration agreement. Arbitration [under the FAA] is a matter of consent, not coercion. Stolt-Nielsen, S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 681 (2010). Even though the federal policy favoring arbitration is broad, the Supreme Court has clearly held that it does not permit a prospective waiver 16 of a party s right to pursue statutory remedies, such as a provision in an arbitration agreement forbidding the assertion of certain statutory rights. Murphy Oil, (Slip op. at 8) (emphasis in original). 17 Furthermore, Congress had declared in the Norris-LaGuardia Act [29 U.S.C. 101 et seq.] that individual agreements restricting employees concerted activities for the purpose of... mutual aid or protection expressly including concerted legal activity violated federal policy and were unenforceable. Murphy Oil, (Slip op. at 1). Therefore, mandatory agreements requiring employees to prospectively waive their right to collectively pursue claims against their employer in any forum are invalid. The Supreme Court s history establishes that individual agreements between employers and employees cannot restrict their Section 7 rights. Murphy Oil, (Slip op. at 1). In National Licorice Co. v. NLRB, 309 U.S. 350, 361 (1940), the Supreme Court held that individual employment contracts requiring employees to present their grievances individually violated the Act. Murphy Oil, (Slip op. at 1). Likewise, J.I. Case Co. v. NLRB, 321 U.S. 332, 337 (1944), observed that [w]herever private contracts conflict with [the Board s] functions [of preventing unfair labor practices], they obviously must yield or the Act would be reduced to a futility. While unions may waive their members right to arbitrate certain contractual claims through the collective bargaining process, such waiver is only permitted because the collective bargaining field is a neutral one in which employees are effectively represented. The waivers at issue in D.R. Horton and Murphy Oil were not the result of an actual agreement they were 16 The Board s holding might differ if the mandatory individual arbitration agreements at issue were postdispute individual arbitration agreements, rather than agreements requiring the prospective waiver of employees rights. In the post dispute setting, the terms are usually fairer because the parties together determined that arbitration represented a more effective alternative to litigation. Allison Anderson, Labor and Commercial Arbitration: The Court s Misguided Merger, 54 B.C. L. Rev. 1237, fn 214 (May, 2013). 17 quoting American Express Co. v. Italian Colors Restaurant, U.S., 133 S.Ct. 2304, 2310 (2013)(emphasis in original), quoting Mitsubishi Mortors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 fn. 19 (1985). See also, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). (emphasis in original). 11

14 imposed upon employees as a term of employment. Not only is requiring employees to waive prospective Section 7 rights without a quid pro quo unconscionable, it violates the Act. 18 E. Section 7 Rights and the Federal Arbitration Act As stated above, the Fifth Circuit s FAA analysis started with the premise that FAA arbitration agreements must be enforced, except if: (1) an arbitration agreement may be invalidated by the FAA s savings clause, or (2) another statute s contrary congressional command may preclude application of the FAA. Murphy Oil, (Slip op. at 6-7). In Murphy Oil, the Board carefully considered the Fifth Circuit s conclusion that mandatory individual arbitration agreements are enforceable, and, as discussed below, the Board concluded otherwise. First, the Board held that the mandatory arbitration agreement at issue was invalid under the FAA s savings clause. 9 U.S.C. 2. Section 2 of the FAA requires revocation of an arbitration agreement upon such grounds as exist at law or in equity for the revocation of any contract. Id., cited by Murphy Oil, (Slip op at 9). Since National Licorice and J.I. Case establish that any individual employment contract that purports to extinguish rights guaranteed by Section 7 of the [NLRA] is unlawful, the FAA s savings clause must apply here. Murphy Oil, (Slip op. at 9) (emphasis in original). Finding otherwise would reduce the Act to a futility. Murphy Oil, (Slip op. at 9). The Fifth Circuit essentially rendered the Act futile. In holding that the FAA s savings clause does not invalidate mandatory individual arbitration agreements, the Fifth Circuit did not mention or attempt to reconcile National Licorice or J.I. Case with its decision. Murphy Oil, (Slip op. at 9). Rather, the court relied on the Supreme Court s decision in Concepcion a case where the issue was whether a California state law finding class-action waivers unconscionable was preempted by the FAA pursuant to the Supremacy Clause. Concepcion, supra, 131 S.C.t at 1748; Murphy Oil, (Slip op. at 9). In Concepcion, the Supreme Court found that the state law at issue was preempted by the FAA because it rendered the FAA s pro-arbitration objectives impossible. Concepcion, 131 S.Ct. at The argument that employees have a meaningful choice in signing mandatory individual arbitration agreements because they can simply find another job with an employer that does not require signing such agreements is not realistic. Jobs are hard to find. If employees have to choose between signing away their rights to engage in concerted legal action or maintaining their employment, they are going to choose employment. Also, if the Supreme Court ultimately upholds mandatory individual arbitration agreements, it is likely that all employers will require such agreements. 12

15 In D.R. Horton, the Fifth Circuit erred by heavily relying on Concepcion where the sole issue was one of federal preemption. 19 While Concepcion reflects the Supreme Court s broad interpretation of the FAA and preference for arbitration, it does not apply the analysis required in D.R. Horton or Murphy Oil the accommodation of multiple federal laws. The Fifth Circuit did not explain how its holding could be reconciled with the NLRA. Murphy Oil, (Slip op. at 9). Second, the Board found that, under the Fifth Circuit s FAA analysis, Section 7 of the NLRA amounts to a contrary congressional command overriding the FAA. Murphy Oil, (Slip op. at 9), citing CompuCredit Corp. v. Greenwood, 132 S.Ct. 65, (2012). 20 The Board disagreed with the Fifth Circuit s conclusion that Section 7 is required to explicitly override the FAA. Murphy Oil, (Slip op. at 9). As the Board explained, the right to engage in concerted legal activity is plainly authorized by the broad language of Section 7. Id. Therefore, the Fifth Circuit s requirement that Section 7 explicitly prohibit arbitration or class action waivers reflects a fundamental misunderstanding of the NLRA and the collective, substantive rights it creates for the Board to enforce. Id. Section 10(a) of the Act further supports a contrary congressional command to override the FAA. The Board explained that in addition to the substantive right to engage in concerted legal activity provided by Section 7, Section 10(a) of the NLRA further proves that the Board s authority shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, law, or otherwise. The mandatory arbitration agreements at issue in D.R. Horton and Murphy Oil constitute means of adjustment... established by agreement that Section 10(a) prohibits. Murphy Oil, (Slip. op. at 9). Again, the NLRA s language reflects a contrary congressional command overriding the FAA. In finding that neither the NLRA s statutory text nor its legislative history contains a congressional command against the application of the FAA, the Fifth Circuit focused on: (1) the fact that the text of the NLRA does not even mention arbitration ; and (2) the lack of legislative 19 In his dissent, Member Johnson accused the Board of rejecting the Supreme Court s clear instructions on how to interpret the Federal Arbitration Act. Murphy Oil, (Slip op. at 35). However, there are no Supreme Court decisions applying Section 7 rights to the FAA. The Supreme Court has not provided clear instructions on how to interpret the FAA in a cases such as D.R. Horton and Murphy Oil. 20 The Fifth Circuit cites CompuCredit to support its requirement that the NLRA must have a contrary congressional command to override the FAA. CompuCredit regarded consumers seeking to bring a class action in court and CompuCredit moved to compel arbitration. The case did not address class waivers; it only addressed the waiver of a judicial forum. The Supreme Court interpreted the Credit Repair Organization Act and found there was no congressional intent to prohibit arbitration. In Murphy Oil, there is no argument that the NLRA prohibits arbitration. 13

16 history reflecting a disavowal of arbitration. D.R. Horton, 737 F.3d at By focusing on arbitration, the court s analysis does not consider the issue in D.R. Horton the waiver of the substantive right to engage in concerted legal action. Neither the petitioner nor the Board argued that the Act barred arbitration. By focusing on arbitration, the Fifth Circuit lost sight of the issue and the jurisprudence supporting the Board s reasonable finding that the language of Section 7 itself reflects a contrary congressional command to override the FAA. The Fifth Circuit and the dissenting opinions in Murphy Oil state that it would be impossible for the NLRA to explicitly prohibit mandatory arbitration agreements since modern class actions did not exist when the NLRA was enacted. D.R. Horton, 737 F.3d at 362. By crafting a broad Act providing employees with certain substantive rights, Congress clearly intended the NLRA to withstand the passage of time. Obviously, social media did not exist in 1935, nor did most modern-day technology used in the in the workplace, yet the Act is applied to social media and the modern workplace. Also, the Fifth Circuit s argument that there is no inherent conflict between the NLRA and the FAA because courts repeatedly have understood the NLRA to permit and require arbitration reflects a misunderstanding about the significant rights of individuals outside of the union context that the NLRA protects. Murphy Oil, (Slip op. at 10). In support of its argument, the court only cites cases regarding the NLRA s deference to arbitration in the collective bargaining context. D.R. Horton, 737 F.3d at The Board explained that collectively bargained arbitration agreements are irrelevant to the analysis of whether employer-imposed mandatory individual arbitration agreements violate the Act. Murphy Oil, (Slip op. at 10). An individual arbitration agreement, imposed by employers on their employees as a condition of employment and restricting their rights under the NLRA, is the antithesis of an arbitration agreement providing for union representation in arbitration that was reached through the statutory process of collective bargaining between a freely chosen bargaining representative and an employer that has complied with the statutory duty to bargain in good faith. Id. While the Board s D.R. Horton and Murphy Oil decisions accommodated both the NLRA and FAA, the Fifth Circuit did not explain how upholding mandatory individual arbitration agreements could be reconciled with the NLRA. Nor did the court explain why, in the event of a conflict between the NLRA and the FAA, it would be the NLRA that would be required to 21 The Fifth Circuit primarily relied on 14 Penn Plaza v. Pyett, 556 U.S. 247 (2009). 14

17 yield. Murphy Oil, (Slip op. at 9). F. The Norris-LaGuardia Act Also Prohibits Mandatory Individual Arbitration Agreements In D.R. Horton, and as affirmed in Murphy Oil, the Board, found: even if there were a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act--which by its terms prevents enforcement of any private agreement inconsistent with the statutory policy of protecting employees' concerted activity, including an agreement that seeks to prohibit a lawful means [of] aiding any person participating or interested in a lawsuit arising out of a labor dispute indicates that the FAA would have to yield insofar as necessary to accommodate Section 7 rights. 22 In holding that illegality under the NLRA is a valid defense, the Supreme Court explained that [i]t is... well established that a federal court has a duty to determine whether a contract violates federal law before enforcing it. Kaiser Steel v. Mullins, 455 U.S. 72, (1982). Making such a determination requires actual consideration of the federal law, and the Fifth Circuit failed to consider the Norris-LaGuardia Act. By not determining if the mandatory individual arbitration agreements at issue violated the Norris-LaGuardia Act, the court disregarded the Supreme Court s direction in Kaiser Steel, supra. The Fifth Circuit did not explain why the Norris-LaGuardia Act did not apply to D.R. Horton. In fact, all the Fifth Circuit said about the Norris-LaGuardia Act is found within a single footnote: The Board also relied on the Norris-LaGuardia Act ( NLGA ) to support its view that the FAA must give way to the NLRA. It is undisputed that the NLGA is outside the Board s interpretive ambit.... We also conclude that the Board s reasoning drawn from the NLGA is unpersuasive. D.R. Horton, 737 F.3d at 362, fn 10 (internal citation omitted). The Board acknowledges that it is not afforded deference regarding its interpretation of the Norris-LaGuardia Act. Murphy Oil, (Slip op. at 10). However, that does not mean that the Fifth Circuit should simply ignore a relevant federal statue. Since the Norris-LaGuardia Act explicitly regards individuals rights to engage in concerted activity and legal action, Courts should consider it when analyzing mandatory individual arbitration agreements in the employment context. Federal courts are not at liberty to pick and choose among Congressional 22 Murphy Oil, slip op. at 6, citing D.R. Horton, supra, and the Norris-LaGuardia Act, 29 USC 104(d). 15

18 enactments. 23 G. Murphy Oil Violated the Act by Enforcing the Illegal Agreement in Court The Board found that Murphy Oil violated Section 8(a)(1) of the Act by enforcing the mandatory individual arbitration agreement at issue in court. Murphy Oil filed a motion to dismiss the plaintiffs FLSA claim and sought to compel individual arbitration of their claims. (Slip op. at 19). An employer violates the Act by enforcing a rule that unlawfully restricts Section 7 rights. 24 Id. The Board has the authority to prevent an employer from benefitting from contracts which were procured through a violation of the Act and which are themselves continuing means of violating it, and from carrying out any of the contract provisions, the effect of which would be to infringe the rights guaranteed by the National Labor Relations Act. National Licorice, supra, at 365. Respondent Murphy Oil and the dissent, citing BE & K Construction Co., 536 U.S. 516 (2002), argue that the Board s holding violates the Company s First Amendment right to petition the government for redress of grievances. (Slip op. at 20). In response, the Board stated that [t]o safeguard this constitutional right, the Supreme Court has held that the Board may find the filing and prosecution of an ongoing or completed lawsuit to be an unfair labor practice only if the lawsuit is both objectively baseless and subjectively motivated by an unlawful purpose i.e., if it lacks a reasonable basis in fact or law and was prosecuted with a retaliatory motive. Murphy Oil, (Slip op. at 20), citing Bill Johnsons Restaurants v. NLRB, 461 U.S. 731 (1983) (ongoing actions); BE & K Construction, supra (completed actions). For example, a union s lawsuit to collect fines wrongfully imposed on employees who crossed a picket line after resigning their membership violates the Act. Murphy Oil, (Slip. op at 20), citing cases. In such cases, the lawsuits have an illegal objective because they seek enforcement of fines that could not lawfully be imposed under the Act. Bill Johnson s, supra, 461 U.S. at 737 fn. 5. By enforcing an unlawful contract, the Respondent acted with an illegal objective and therefore violated Section 8(a)(1) of the Act. Murphy Oil, (Slip op. at 21). 23 Murphy Oil, slip op at 9, quoting Morton v. Mancari, 417 U.S. 535, 551 (1974). 24 In support of its position, the Board cites NLRB v. Washington Aluminum Co., 370 U.S. 9, (1962); Republic Aviation Corp., 324 U.S. 793 (1945); and Elevator Constructors (Long Elevator), 289 NLRB 1095, 1095 (1988), enfd., 902 F.2d 1297 (8th Cir. 1990)(Board found that a union violated the Act by filing a grievance predicated on a reading... of the collective-bargaining agreement that would convert it into a de facto hot cargo provision in violation of Section 8(e). ). 16

19 III. The Fifth Circuit Failed to Afford the NLRB Proper Deference 25 In Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, (1984), the Supreme Court held that courts should defer to an agency s interpretation of the statute it administers. Chevron deference is afforded when: (1) Congress has not directly spoken to the precise question at issue, 26 and (2) if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency s answer is based on a permissible construction of the statute. Id. at 843. In determining whether concerted legal activity is a substantive right under the Act, the Board interpreted the statute that it administers the NLRA. Therefore, Chevron applies to the Board s finding that concerted legal activity is a substantive right. Arguably, the intent of Congress that concerted legal activity is a substantive right under the NLRA is clear and the court must defer to the Board. However, even if some may argue that such intent is not clear, Chevron deference still applies. Under Chevron, if the intent is not clear, the next inquiry is whether the Board s conclusion that concerted legal activity is a substantive right is a reasonable interpretation of the NLRA. The Board s conclusion, discussed in detail above, was based on its expertise in labor law, Board and court caselaw, and the Act itself. In upholding its duty to interpret the Act administers, the Board s conclusion was reasonable and entitled to Chevron deference. Recognizing its duty to defer to the Board regarding its interpretation and application of the NLRA, the Fifth Circuit stated: This court will uphold the Board's decision if it is reasonable and supported by substantial evidence on the record considered as a whole. Strand Theatre of Shreveport Corp. v. NLRB, 493 F.3d 515, 518 (5th Cir.2007); see also 29 U.S.C. 160(e). Substantial evidence is such relevant evidence as a reasonable mind would accept to support a conclusion. J. Vallery Elec., Inc. v. NLRB, 337 F.3d 446, 450 (5th Cir.2003) (quotation marks omitted). In light of the Board's expertise in labor law, we will defer to plausible inferences it draws from the evidence, even if we might reach a contrary result were we deciding the case de novo. Id. This deference extends to both the Board's findings of facts and its application of the law. Id. While the Board's legal conclusions are reviewed de novo, Strand, 493 F.3d at 518, its interpretation of the NLRA will be upheld so long as it is rational and consistent with the Act. Litton Fin. Printing Div., a 25 See Deference and the Federal Arbitration Act, Note, 128 Harv. L. Rev. 907 (Jan. 12, 2015). 26 If the intent of Congress is clear, that is the end of that matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. Chevron, 467 U.S. at

20 Div. of Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 201, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991) (quotation marks omitted). D.R. Horton, 737 F.3d at However, the Fifth Circuit chose not to afford the Board such deference. 27 Supporting the Board s reasonable construction of the NLRA, the Fifth Circuit acknowledged that there are Board and circuit cases supporting the Board s conclusion that collective and class claims, whether in lawsuits or arbitration, are protected by Section 7. D.R. Horton, Inc., supra at 357. One would expect the court to then endorse the Board s finding that the Section 7 right to engage in concerted legal activity is a substantive right. However, the court states that [t]o stop here, though, is to make the NLRA the only relevant authority. The Federal Arbitration Act ( FAA ) has equal importance in our review. Caselaw under the FAA points us in a different direction than the course taken by the Board. 28 D.R. Horton, 737 F.3d at 357, fn 8. As mentioned above, the caselaw the Fifth Circuit relied on to undermine the Board did not regard the NLRA. In fact, the court conceded that none of the caselaw [under the FAA] considered a Section 7 right to pursue legal claims concertedly. The Fifth Circuit quotes Southern S.S. Co. v. NLRB, 316 U.S. 31 (1942) and Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 537 (2002), likely for the proposition that it does not have to provide Chevron deference to the Board in this case. 29 D.R. Horton, 737 F.3d at 356. In Southern S.S. Co., the Board ordered reinstatement of crewmembers who were terminated while on strike finding that the crewmembers did not violate federal mutiny law. Finding that the Board had no expertise in mutiny law, the Supreme Court stated that the Board has not been commissioned to effectuate the policies of the Labor Relations Act so single-mindedly that it may wholly ignore other and equally important Congressional objectives. Southern S.S. Co., supra at 47. In that case, violation of federal mutiny laws prohibited reinstatement. In Hoffman Plastic, the Supreme Court found that immigration laws prohibited the Board from awarding backpay to an undocumented worker who was laid off in violation of the NLRA. 27 Arguably, no such deference is required of the NLRB s interpretation of laws other than the NLRA. However, if courts afforded the NLRB s finding that concerted legal activity is a substantive right under the Act, based on Supreme Court precedent stating that individuals cannot waive substantive federal rights by signing agreements under the FAA, courts would have to conclude that mandatory individual arbitration agreements are in fact invalid. See Deference and the Federal Arbitration Act, supra; Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., 473 U.S. 614, 628 (1985). 28 The Fifth Circuit primarily relied on Gilmer, supra, an ADEA case. 29 In its decision, the Fifth Circuit does not directly mention Chevron. 18