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The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.

As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).

The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.

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Continue Reading Supreme Court Considers Class Waivers in Employment Arbitration Agreements

As we’ve noted in this space before, one of the most persistent efforts to undermine the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion—which held that the Federal Arbitration Act (FAA) generally requires enforcing arbitration agreements that waive class or collective proceedings—has been spearheaded by the National Labor Relations Board. In 2012, the Board concluded in the D.R. Horton case (pdf) that Section 7 of the National Labor Relations Act (NLRA), which protects the ability of employees to engage in “concerted activities” (for example, union organizing), supersedes the Supreme Court’s interpretation of the FAA in Concepcion and its progeny and requires that employees be allowed to bring class actions (either in court or in arbitration).

Until recently, the D.R. Horton rule had been rejected by every appellate court to consider it—the Second Circuit, Fifth Circuit, and Eighth Circuit as well as the California and Nevada Supreme Courts—not to mention numerous federal district courts. But last year, the Seventh Circuit and Ninth Circuit parted ways with this consensus, agreeing with the Board and concluding that (at least in some circumstances) agreements between employers and employees to arbitrate their disputes on an individual basis are unenforceable.

This circuit split all but guaranteed that the Supreme Court would need to step in, and sure enough, last Friday, the Court granted certiorari in three cases involving the validity of the D.R. Horton rule. (We drafted amicus briefs for the U.S. Chamber of Commerce in each case). One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.

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Continue Reading Supreme Court Will Review NLRB’s Anti-Arbitration D.R. Horton Rule

Today is Halloween, an occasion when our thoughts turn to jack o’lanterns, ghosts, and zombies.  We are particularly fascinated by zombies—the dead returned to life. But we’re not the only ones.  In a decision earlier this week, a majority of the National Labor Relations Board voted to reanimate the dead.

The Board’s zombie of choice?  …

We have frequently chronicled the ongoing efforts of the plaintiffs’ bar to circumvent the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, which held that the Federal Arbitration Act (FAA) requires the enforcement of parties’ agreements to resolve their disputes through individual arbitration rather than class or collective proceedings. One of the most prominent efforts to evade Concepcion has been the National Labor Relations Board’s ruling in D.R. Horton (pdf), which declared that the right of employees to engage in “concerted activities” under Section 7 of the National Labor Relations Act (NLRA) trumps the FAA and requires that employees be allowed to bring class actions (either in court or arbitration). The Board also pointed to the Norris-LaGuardia Act, which provides that employees “shall be free from the interference, restraint, or coercion of employers” in “concerted activities.” In the NLRB’s view, any business subject to the Board’s jurisdiction (and that includes most private-sector businesses) that requires its employees to agree to resolve disputes through individual arbitration has engaged in an unfair labor practice and faces the threat of agency action.

Numerous plaintiffs seeking to invalidate arbitration provisions in employment agreements have claimed that the Labor Board’s D.R. Horton decision establishes the invalidity of arbitration provisions that include a class waiver, but virtually every court to consider the question has declined to follow the NLRB’s lead. Yesterday, in an important decision for employers nationwide, the Fifth Circuit invalidated the Board’s decision, holding in DR Horton, Inc. v. NLRB (pdf) that the NLRB’s position is inconsistent with the FAA. In overturning the Board’s order, the Fifth Circuit noted its agreement with “[e]very one of our sister circuits to consider the issue,” each of which “has either suggested or expressly stated that they would not defer to the NLRB’s rationale, and held arbitration agreements containing class waivers enforceable.” Slip op. at 25 (citing Richards v. Ernst & Young, LLP (9th Cir.), Sutherland v. Ernst & Young LLP (2d Cir.), and Owen v. Bristol Care, Inc. (8th Cir.)). (Our colleague Andy Pincus will be arguing this issue in the Ninth Circuit later this week in Johnmohammadi v. Bloomingdale’s, Inc. on behalf of the U.S. Chamber of Commerce; a PDF of our amicus brief in that case is available here.)

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Continue Reading Fifth Circuit Overturns NLRB’s Anti-Arbitration D.R. Horton Ruling

We’ve been reporting on the constitutional challenge to President Obama’s recess appointments to the National Labor Relations Board, which has serious implications for the recess appointment of Consumer Financial Protection Bureau head Richard Cordray. Yesterday, the Supreme Court granted the government’s unopposed petition for a writ of certiorari from the D.C. Circuit’s decision in Noel…

We’ve blogged about the D.C. Circuit’s ruling in Noel Canning v. NLRB (pdf) that President Obama’s three 2012 recess appointments to the National Labor Relations Board are unconstitutional. The consequence of that decision was to invalidate the NLRB decision against Noel Canning for lack of a quorum of NLRB members. The decision also cast a…

In the wake of AT&T Mobility LLC v. Concepcion, the California Supreme Court granted review in three cases involving significant arbitration issues, including key questions about whether the Federal Arbitration Act preempts California law concerning the enforceability of arbitration agreements.

My colleagues and I have filed amicus briefs on behalf of the Chamber of Commerce of the United States in all three cases, the most recent of which is Iskanian v. CLS Transportation, No. S204032.

In Iskanian, the Second District of the California Court of Appeal had affirmed an order compelling individual arbitration in a putative class/representative action alleging, among other things, that the defendant had failed to pay overtime and provide required meal and rest breaks. For more background on the grant of review and the decision below, please see our prior blog post here.

The Chamber’s amicus brief (pdf) to the California Supreme Court explains why the court of appeal was correct.

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Continue Reading U.S. Chamber of Commerce Files Amicus Brief On Arbitration Issues In Key California Supreme Court Case

We’ve previously written about the D.C. Circuit’s decision in Noel Canning v. NLRB, which held that President Obama’s three recess appointments in 2012 to the National Labor Relations Board (NLRB) are unconstitutional. The Solicitor General has just filed a petition for certiorari, asking the Supreme Court to review the D.C. Circuit’s decision.

The…

On January 25, 2013, the D.C. Circuit held in Noel Canning v. NLRB (pdf) that President Obama’s three recess appointments last year to the NLRB are unconstitutional.  The decision casts a shadow over every action taken by the NLRB since those appointments were made on January 4, 2012.  Moreover, because Richard Cordray received a recess…