Wage-and-hour plaintiffs likely to back NLRB’s bid for SCOTUS review of class waivers

September 12, 2016

(Reuters) – On Friday, as expected, the National Labor Relations Board and the Justice Department filed a petition for certiorari in NLRB v. Murphy Oil, asking the U.S. Supreme Court to decide whether employment contracts requiring workers to arbitrate disputes individually are invalid under federal labor laws. The government’s petition for Supreme Court review of a decision from the 5th U.S. Circuit Court of Appeals follows two other requests last week for Supreme Court to hear the same issue. The previous cert petitions were both filed by employers – Epic Systems and Ernst & Young – on the losing side of decisions by federal appellate circuits that found such provisions a violation of the National Labor Relations Act.

It seems inevitable that the justices will agree to decide the legality of these mandatory arbitration clauses, which typically demand that workers waive the right to sue as a class or arbitrate as a group. As the NLRB noted in its petition, “countless” non-union employees are subject to such provisions – possibly as many as one-third of all non-union workers in the U.S., according to the NLRB’s brief.

And the split among the federal circuits could not be starker. On one side are the 5th and 8th U.S. Circuit Courts of Appeal, which have held repeatedly that under the Federal Arbitration Act and Supreme Court precedent favoring arbitration, employers have the right to require employees to arbitrate disputes individually. On the other side are the 7th and 9th Circuits, which said in rulings in May and August, respectively, that labor laws safeguard employees’ right to act collectively. The 2nd Circuit fell into the pro-arbitration camp in a 2013 decision (in a different Ernst & Young case), but a three-judge panel said earlier this month in a case called Patterson v. Raymour Furniture that it might otherwise have agreed with the 7th and 9th Circuits that class waivers are unenforceable. The 3rd, 4th, 6th, 11th and D.C. Circuits, meanwhile, are all facing the issue in pending cases, according to the NLRB.

So the question for the justices is probably going to be which case they take rather than whether to resolve the circuit split. Epic Systems, the first party to ask for Supreme Court review of class waivers, argued that the justices should hear a case pitting employees directly against their employer, since they are the ones directly impacted by the arbitration provisions. Ernst & Young seconded that argument but said its case is the cleaner vehicle because virtually all of its tens of thousands of employees around the country are covered by the same arbitration provision – which has itself been divided the 2nd and 9th Circuits. Both Epic and E&Y noted that the NLRB was an amicus in their cases so the government’s arguments are part of the record.

The Justice Department did not devote many words to arguing that the Supreme Court should take the NLRB case rather than granting certiorari to Epic or E&Y. In footnotes, the NLRB petition simply said its case is a better vehicle for the justices because the NLRB is best able to defend its construction of the National Labor Relations Act as a party instead of as an amicus. That aligns with the central argument of the cert petition, which is that the savings clause in the Federal Arbitration Act, which says arbitration contracts are unenforceable if otherwise illegal, means the FAA doesn’t protect class waivers – but that even if the savings clause does not apply, the NLRB’s interpretation of employee rights under the labor laws deserves deference.

Trust me, we are going to hear a lot more about which case frames the issue best. Ordinarily, the justices seem to favor cases involving the Justice Department, perhaps because they know those will be well litigated. But here, counsel of record for Epic and E&Y are very well-regarded former high-ranking Justice officials (Neal Katyal of Hogan Lovells for Epic, Kannon Shanmugam of Williams & Connolly for E&Y) who make good points about allowing parties with a direct stake in the outcome to control the issue at the Supreme Court.

I learned Monday, though, that the other folks with a direct interest in the class waiver question – employees attempting to bring group claims against their employers – are leaning toward backing the NLRB’s cert petition. Michael Rubin of Altshuler Berzon represents workers who brought a wage-and-hour class action against Raymours Furniture. As I mentioned, the 2nd Circuit affirmed the dismissal of their suit earlier this month, with a three-judge panel reluctantly bowing to precedent on the enforceability of arbitration provisions that require employees to resolve disputes individually.

Rubin told me he is planning to forgo a request for en banc review at the 2nd Circuit and instead file his own request for the Supreme Court to take up the class waiver issue, “joining the chorus,” as he said. He said he will argue that the justices should grant cert in the NLRB’s Murphy Oil case, not the private cases, because the government is in charge of enforcing labor laws. Rubin, who has been battling for about 10 years to persuade an appellate court – state or federal – that the NLRA and the Norris-LaGuardia Act of 1932 trump the Federal Arbitration Act, said it has been frustrating to watch courts focus on the Supreme Court’s pro-arbitration precedent. He plans to explain in his cert petition (as he did in his brief at the 2nd Circuit) that Norris-LaGuardia buttresses arguments that employees have a substantive right to act collectively.

Plaintiffs’ lawyer Max Folkenflik of Folkenflik & McGerity, who represents Ernst & Young employees, also told me he is likely to support Supreme Court review of class waivers, even though he won the 9th Circuit decision Ernst & Young has asked the justices to reconsider.

Everyone, in other words, wants the Supreme Court to figure out the limits of employer arbitration provisions. They just don’t agree on the best case to do it in.

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