In what could be the judicial heavyweight match of the year (in at least the employment law realm), last Friday the Supreme Court agreed to examine three petitions to determine whether employers can require employees to arbitrate a dispute individually rather than through a class or collective proceeding.
For the past several years the National Labor Relations Board (NLRB) has been cutting away at employers’ rights under the Federal Arbitration Act (FAA) by ruling that arbitration agreements that include waivers of class or collective action are unenforceable. For years employers have put waiver clauses in arbitration agreements to keep arbitration rights between just two parties – the employer and the employee. Obama’s NLRB determined that including a waiver that prohibits employees from collectively arbitrating a dispute is a breach of the NLRA. Thus began the lead-up to this judicial title fight.
From NLRB decisions adverse to the employer and appeals into the lower federal courts up to the federal appeals courts, this issue went through three circuit courts. The 2nd, 5th, and 8th ruled the FAA supersedes the NLRA and that arbitration agreements with clauses waiving class and collective proceedings are legal. The 7th and 9th, as well as the NLRB, held the NLRA should supersede the FAA because workers’ rights to “engage in concerted activity for their mutual aid and protection” is in essence, paramount to the FAA.
The NRLB appealed the 5th circuit’s decision and two employers appealed the adverse decisions out of the 9th and 7th Circuit courts giving the US Supreme Court the opportunity to consolidate all three cases into one.
The NLRB faces an up-hill battle in the Supreme Court on this. Decisions involving the Federal Arbitration Act, a law that was intended to promote private dispute resolution over the cost and delay of settling issues in court, have historically all gone in favor of the FAA. But those past SCOTUS decisions favoring the FAA were not in the realm of employment arbitration or did not invove the NLRA (Section 7), which puts this issue as the prize fight of the year so far.
Arguments on this case look like they will take place in March, and the Court will have a decision on it before adjournment in June.
Source: Seyfarth Shaw Client Alerts Supreme Court Agrees to Rule on Legality of Class Action Waivers. 1/13/2017