DOJ About-Face: Supporting Class Action Waivers, Parting Ways with the NLRB

by Akerman LLP - HR Defense

The Department of Justice (DOJ) has just switched sides in a trio of high profile arbitration cases now pending before the Supreme Court, joining with the employers to argue that the National Labor Relations Board’s (NLRB’s) ban on the use of class action waivers in arbitration agreements oversteps its authority and is misguided.

In the wake of the recent explosion in collective and class action litigation under various federal and state employment statutes, employers have started to use mandatory arbitration agreements that not only require employees to forgo litigation and submit employment-related claims to arbitration, but also compel employees to waive the right to assert or participate in collective and class actions. The benefits of utilizing such an agreement are obvious. First, they prevent one disgruntled employee from asserting a claim on behalf of others who may not have pursued such a claim by themselves, but are also not about to turn down the opportunity to cash in if one of their co-workers is carrying the load for the group. Second, they also tend to reduce the attractiveness of an employee’s case to plaintiffs’ attorneys, the majority of whom would prefer to be pursuing class or collective claims in court, with the potential for far larger payouts and awards of legal fees. (Most employment statutes are fee-shifting, meaning the defendant will be required to pay the plaintiff’s attorney’s fees in the event that plaintiff prevails.)

There is one big problem, however, with using these types of agreements: namely, NLRB claims that such class and collective action waivers are invalid, because they infringe on employees’ rights under the National Labor Relations Act (NLRA) to engage in “concerted activities” for the mutual benefit of each other – even when the claims in question are asserted under other employment statutes, such as the Fair Labor Standards Act or Title VII, and even when the claims arise in a non-unionized workplace. In fact, over the past five years, the NLRB has mounted an aggressive assault on these types of class and collective action waivers, filing multiple complaints against employers all over the country for using these agreements. These have produced mixed results, with the Seventh and Ninth Circuit Courts of Appeals siding with the NLRB, and the Fifth Circuit siding with employers and upholding the use of collective and class action waivers in arbitration agreements. In January, the Supreme Court decided that it would weigh in on this issue in these three conflicting cases.

Notably, while this issue was being litigated in the lower courts during the Obama administration, the DOJ had been a steadfast ally of the NLRB, arguing at each turn that such agreements are invalid and violate federal labor laws.

That all just changed. On June 16, 2017, the DOJ filed an amicus brief in the pending Supreme Court cases, in which it said that, after reconsidering its position, it has “reached the opposite conclusion” and now believes that the NLRB’s position fails to give due consideration to the federal statutes and policy that encourage the use of arbitration agreements. Bolstering the employers’ case even further, in its brief, the DOJ relies heavily on the Supreme Court’s 2012 decision in CompuCredit Corp. v. Greenworld, in which the Court held that, unless a federal statue expressly prohibits arbitration, claims asserted under the statute are subject to arbitration – a standard the DOJ now asserts the NLRA falls short of satisfying.

If the Supreme Court agrees with the DOJ, it will be a major victory for employers across the Country, and will greatly reduce the most current risk of utilizing arbitration agreements with collective and class action waivers at this time: being hit with a complaint by the NLRB claiming that, by utilizing such an agreement, an employer has violated the NLRA.

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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