Supremes Grant Cert on NLRB Challenge to Class Waiver

Business Conflict Blog by Peter Phillips

As has been widely reported, the Supreme Court has granted certiorari to review three conflicting decisions among the circuits on the enforceability of an employer’s unilaterally promulgated waiver of employees’ right to participate in collective redress.

Despite reports to the contrary, it seems prudent to remember that this is not an arbitration question.  The challenge does not implicate the F.A.A. The question presented to the Court is whether an employer’s unilateral ban on employee’s participating in class actions violates Section 7 of the N.R.L.A., which provides in part that “Employees shall have the right to… engage in… concerted activities for the purpose of… mutual aid or protection….”

The National Labor Relations Board, which is charged with the interpretation of this statute, found that an employer violates this section by purporting to deny employees the right to seek collective redress.  Arbitration is, technically, merely the cup that holds the coffee.  Whether the denial of the right to “engage in concerted activities” is found as a provision of an arbitration agreement, or is set forth in some other part of the employer’s policies and practices, is a matter of indifference to the NLRB.

We are accustomed to seeing this question arise in the context of arbitration provisions, and it is therefore easy to conflate the two issues, and to assume that federal policy favoring arbitration will be brought to bear.   And, indeed, the fact that courts enforce such denials if they are ensconced in arbitration agreements (though they presumably would not enforce them if they were, say, in an employee handbook) prompts employers to draft arbitration provisions, not in order to provide private means of redress, but in order to eliminate class actions.  And many of us who seek to preserve the integrity of arbitration find that practice offensive.

Here, however, the Court will not need to balance the sanctity of arbitration clauses in order to focus on the neater, and more tantalizing, question:  Is a class action waiver, however housed in an agreement, a violation of workers’ well-established rights to engaged in concerted activities for the purpose of mutual aid and protection?  Or may an employer, by its own unilateral action, exempt itself from the scope of the National Labor Relations Act?

And are the findings of the agency charged to make such determinations owed deference?

                        author

F. Peter Phillips

F. Peter Phillips is a commercial arbitrator and mediator with substantial experience providing consultation on the management of business disputes to companies around the globe. A cum laude graduate of Dartmouth College and a magna cum laude graduate of New York Law School, Mr. Phillips served for nearly ten years… MORE >

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