The U.S. Supreme Court has agreed to hear a trio of wage and hour cases involving arbitration agreements that require workers to waive their right to pursue employment claims as a group.
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The validity of such waivers has in recent years divided federal appeals courts and drawn the attention of the National Labor Relations Board (NLRB). The Board has held several times that even though the federal law allows employers to adopt mandatory arbitration agreements, the National Labor Relations Act (NLRA) grants workers a nonwaivable right to pursue claims on a class or collective basis.
It first reached that conclusion in 2012, holding that an employer’s arbitration agreement violated the NLRA because it required employees to agree to dispute claims individually. The employer appealed to the 5th Circuit, which reversed the Board’s ruling (D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013)).
Undeterred, the NLRB reaffirmed its position in a 2014 ruling, which the 5th Circuit also vacated (Murphy Oil U.S.A., Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015)).
The Supreme Court has now agreed to hear that case, along with two others that take the opposite position (Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016)).
The Supreme Court has previously upheld employers’ ability to require arbitration with respect to other laws but it has not evaluated whether employees can waive their NLRA right to pursue claims collectively.
Potential Outcomes
The NLRB is currently short two board members and once President Donald Trump fills those vacancies, experts say it may reverse course on some recent employee-friendly positions, including this issue. It will take some time to see the effects of the appointments, however, said David S. Fortney—of Fortney & Scott—during a recent webinar.
The real game-changer will be when the current general counsel’s term expires in November, he said. The Board only can rule on cases brought by the general counsel, so it could be at least a year until it can change some of its positions, Fortney explained.
That means the NLRB is unlikely to be involved in further decisionmaking on this issue. “This case is going to get decided on its own,” Brian Mumaugh, a partner at Holland & Hart, told BLR®.
A new Supreme Court justice, however, could have an effect on this case, he said. Trump has said that he will nominate a judge during his first 2 weeks in office, which, according to SCOTUSblog, means the justice could be in place by April. The Court has not yet said when it will consider this case, but Mumaugh said it is likely to do so by June, so it’s possible the new justice could rule on the case.
However, while Trump is widely expected to appoint an employer-friendly justice, Mumaugh said it’s not a given that the Court will be split 5-4 on this issue. “Everybody thought the Obamacare ruling would go 5-4,” but it didn’t, he said. “So you never know. It’s difficult to predict.”
Employer Takeaway
While some clarity on the issue will be good for everybody, Mumaugh said, employers obviously will be disappointed if the Court finds these waivers invalid. Businesses have spent considerable time and money setting up these agreements, and they’ve been effective, he said.
If the Court rules in that direction, employers likely will look to other strategies to minimize the impact of potential litigation, Mumaugh said. “Everybody’s going to have to recalibrate and consider other options.”
One option is to continue using arbitration agreements but without class action waivers. It’s also possible that employers will turn to jury waivers, he said, which, as the name implies, ensure that a case is decided by a single judge. It’s not the same tool but it’s another way to lessen the impact of employment litigation, Mumaugh said.
But for now, employers probably will want to maintain the status quo, he said. The risk of doing so is fairly small, compared to the work involved in undoing such waivers, especially considering their validity ultimately could be upheld. “If you haven’t made any changes now, regardless of where you’re located or where your operations are, I would wait it out,” Mumaugh said.
On the other hand, he said, “if you don’t have them in place, and you were considering it, I would wait until this decision comes down.”
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Kate McGovern Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics and currently writes for