Class Action Waiver Update: Will a Switch in Time Persuade Nine?

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

It was no surprise when, on June 16, 2017, numerous business and employer groups (including several represented by Ogletree Deakins) filed over a dozen amicus briefs supporting the employers in the three class action waiver cases pending in the Supreme Court of the United States: National Labor Relations Board v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris.

But it was surprising that one of those amicus briefs supporting the employers was filed by the United States Solicitor General. This was unexpected because, up to that time, the Solicitor General had been counsel of record representing the National Labor Relations Board (NLRB) opposing the employers’ position.  What a difference a few months and a new administration make. And what a positive development for employers to have such an influential advocate on their side.

With his about-face, the Solicitor General now agrees with the employers that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA) and not rendered unlawful by Section 7 of the National Labor Relations Act (NLRA). This is directly contrary to the NLRB’s position set out in its D.R. Horton and Murphy Oil decisions.

Following the Solicitor General’s switching sides, the NLRB issued a press release noting that the Solicitor General had authorized the Board “to represent itself” in the Supreme Court. The NLRB’s Associate General Counsel has now appeared to defend the agency’s position. The NLRB’s brief in the Supreme Court is due on August 9, 2017.

Thus, as it now stands, the federal government could end up filing briefs on both sides of these cases. While that would be an interesting scenario, it’s still possible the NLRB will switch sides. President Trump has the opportunity to fill two of the NLRB’s five seats in short order. On June 19, 2017, the president announced a nominee to fill one of those two slots. A second nomination is expected at any time. A new Board majority could overrule the Board’s D.R Horton and Murphy Oil decisions while these cases are pending.

What if the NLRB abandons its D.R. Horton and Murphy Oil decisions prior to the Supreme Court’s decision in these cases? Will the Supreme Court dismiss these appeals as moot?  That’s unlikely due to the procedural posture of two of the three cases.

As a reminder, one of the cases on appeal—the Fifth Circuit’s decision in Murphy Oil—involved that Court of Appeals’s direct review of an NLRB order finding an employer had engaged in an unfair labor practice under the NLRA by maintaining an individual arbitration agreement. If the Board changes its law on class action waivers, the Board could potentially ask the Court to remand the case to the Board for reconsideration.

Unlike the decision in Murphy Oil, however, the Seventh and Ninth Circuit decisions in Lewis and Morris are not appeals from Board decisions. They don’t involve Board proceedings at all. Instead, those two cases are appeals under the FAA from district court orders ruling on employers’ motions to compel individual arbitration. In their decisions, the Seventh and Ninth Circuits directly interpreted Section 7 of the NLRA and concluded it unambiguously grants employees a right to invoke collective procedures in litigation. Those two courts did not simply defer to the Board and follow its lead; instead, they held the NLRA itself compelled their decisions. In essence, the Seventh and Ninth Circuits held the NLRA bans class action waivers, regardless of how the Board interprets Section 7. Therefore, if a new Board majority overturns the Board’s D.R. Horton/Murphy Oil precedent, the Supreme Court will likely still have to review the Seventh and Ninth’s Circuit’s decisions.

In the meantime, the Solicitor General’s switching sides is—from employers’ perspective—a step in the right direction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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