Paper No. ______
Research Assignment Part 1
The State of Confusion is faced with an issue as to whether or not it is unlawful for an employer to require an employee waive the right to sue in court over a class action employment dispute. The Court has previously ruled that an employee who files a class action claim is engaged in concerted activity as long as the claim concerns employment. Previous decisions by the National Labor Relations Board are applicable to both sides of this issue.
Argument that a waiver regarding a class action claim is unlawful
The opinion in D.R. Horton, Inc., 192 LRRM 1137 (2012), stated that it is unlawful for an employer to require employees covered by the NLRA to sign a form excluding them from filing class action claims over their working conditions either through the courts or through private arbitration. The Board found that this is a restriction of employees’ protected right to concerted activity. The Board found that the right to class action is concerted activity because it involves multiple employees combining to address workplace grievances. This is protected under the NLRA because it is a substantive right rather than a procedural right: “Any contention that the Section 7 right to bring a class or collective action is merely “procedural” must fail. The right to engage in collective action—including collective legal action—is the core substantive right protected by the NLRA and is the foundation on which the Act and Federal labor policy rest.” (p. 2286).
The Board in D.R. Horton, Inc. also found that employers violate the NLRA when they impose mandatory agreements that require employees to address their grievances individually. The Board found that its decision did not conflict with the FAA because it did not state or imply that arbitration agreements are less preferred than other agreements. It also established that employees’ right to concerted activity is substantive and not procedural, and so arbitration agreements may not waive this right. Finally, the Board acknowledged that “The FAA permits the enforcement of private arbitration agreements,” but held that “those agreements remain subject to the same defenses against enforcement to which other contracts are subject” (p. 2284).
To decide whether or not the specific policy was unlawful, the Board used a test established in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004). The test states that the given policy is unlawful if it explicitly restricts activities protected by §7 of the NLRA. The test further establishes that if the policy does not explicitly restrict §7 activities, a violation may still be found under any one of three additional conditions: “(1) reasonable employees would construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.” (p. 646, 647). The Board found that the policy in D.R. Horton, Inc. explicitly restricted protected activity, and was therefore unlawful.
The Board used the same test from Lutheran Heritage Village-Livonia in U-Haul Co. of California, 347 NLRB 375 (2006). The Board found that a required arbitration policy as a condition of employment violates §8(a)(1) and (4) of the NLRA. The given policy in the case was unlawful because it would reasonably make employees think that they were restricted from filing charges with the Board. Therefore, employers may not require employees to sign mandatory arbitration policies as a condition of employment if that policy will lead employees to reasonably think that they may not file a workplace grievance with the NLRB.
In Murphy Oil Co. 201 LRRM 1385 (2014), the Board found that the Agreement in question violated “Section 8(a)(1) because it explicitly prohibit[ed] employees from concertedly pursuing employment-related claims in any forum.” (p. 1406). The Agreement required employees to waive their right to file a class action claim over their working conditions in a Court. The Board qualified that restricting an employee’s right to file a class action claim was unlawful because it was concerted activity.
Argument that a waiver regarding a class action claim is lawful
In D.R. Horton, Inc. v. NLRB, 197 LRRM 2637 (5th Cir. 2013), the Court decided that the Board did not give enough weight to the Federal Arbitration Act. The Board had simply found “that any employee-employer contract prohibiting collective action fails under Section 7, and arbitration agreements are treated no worse and no better.” (p. 2646). After considering the FAA to a greater extent, the Court ruled that the law requires agreements to be followed in consistency with their wording, and so the waiver in this case would be enforceable. The class action waiver in dispute was not unlawful because it “should be enforced according to its terms unless a contrary congressional command can be inferred from an inherent conflict between the FAA and the NLRA’s purpose… we do not find such a conflict.” (p. 2649). The Court also found that although this requirement may be invalidated by the saving clause of the FAA, the clause did not apply in this case because the right to a class action claim may not determine whether or not an arbitration agreement is enforceable.
The Court in D.R. Horton, Inc. v. NLRB also disagreed with the idea that the right to file a class action claim is substantive and therefore protected under the NLRA. The Court disagreed with the Board’s finding that the NLRA should be used to determine the right to class action because it is unique in that its function is to allow employees to act collectively. The Court argued that it had long been established that the right to file a class action claim is procedural and not substantive.
Member Miscimarra of the dissent in Murphy Oil Co. argued that the NLRA is not applicable to procedures unrelated to the Act that govern the method by which other Courts will rule on non-NLRA claims. Member Miscimarra also pointed out that concerted activity is different from a class action claim: “Nor is “class” litigation, by itself, sufficient to establish protected Section 7 conduct. The essence of “class” litigation is that the litigation binds nonparticipating parties.” (p. 1416). Class action claims may be pursued by an individual, and so Member Miscimarra found that an interpretation of class action as concerted activity was too broad. Member Miscimarra also found that §7 specifically requires that employees must be actively participating in activities if they are to be classified as concerted. Member Miscimarra raised the point that class action participants may not have participated in the disputed activities. Potential participants in class litigation may not always fall under the NLRA’s definition of who is entitled to protected activity.
Member Johnson of the dissent in Murphy Oil Co. also disagreed with the Board’s assertion in D.R. Horton Inc. that the right to attempt to gain class certification under Rule 23 was different from a guarantee of class certification. Member Johnson argued that allowing employees to pursue class certification despite the presence of a class action waiver would be “creating a privilege for a certain class of Rule 23 litigants—persons who are “employees” under the National Labor Relations Act—that does not exist for any other Rule 23 litigant. By any definition, that is creating both a guarantee and a substantive alteration of Rule 23.” (p. 1440). The right to attempt to gain class certification would therefore become a substantive right. This privilege would only be applicable to employees protected under the NLRA and would change the process of class action. Since Congress previously determined procedures for class action claims, Member Johnson argued that the Board overstepped its authority with its interpretation of the Act. It should therefore be lawful for an employer to restrict employees’ attempts to gain class certification.