Trump Department of Justice Reverses Course on Class Action Waivers

by Foley & Lardner LLP
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On June 16, 2017, the United States Department of Justice (DOJ) changed its position with respect to the enforceability of class action waivers in the labor and employment context. The move came via the DOJ’s filing of an amicus curiae brief in three consolidated cases pending before the Supreme Court (National Labor Relations Board v. Murphy Oil USA, Case No. 16-307, Epic Systems Corp. v. Lewis, Case No. 16-285 and Ernst & Young LLP v. Morris, Case No. 16-300) The Court’s decision in these cases – which were granted review in January 2017 – is expected to resolve a circuit split over whether class action waivers included in employee arbitration agreements, constitute illegal waivers of rights under Section 7 of the National Labor Relations Act (NLRA). The Seventh and Ninth Circuit Court of Appeals have ruled that such waivers violate Section 7 of the NLRA, while the Second, Fifth, Eighth and Eleventh Circuits have upheld the validity of class action waivers in the employment context.

In September 2016, the DOJ under the Obama Administration, on behalf of the National Labor Relations Board (NLRB), filed a petition for certiorari with the Supreme Court, aligning itself with the NLRB and its position that class action waivers are unenforceable and violate the NLRA. Less than a year later, the Trump Administration’s DOJ has completely abandoned its predecessor’s position. In its June 16thamicus brief, the DOJ argued that the Federal Arbitration Act mandates the enforcement of arbitration agreements containing class action waivers, unless overridden by a contrary congressional command or unless the waiver would deprive a plaintiff of substantive rights. The DOJ’s current position is that enforcing class action waivers does not result in a surrender of substantive Section 7 rights, which are limited to union organizing and collective bargaining. According to the DOJ, those particular rights are in no way impacted by the procedural limitation of precluding individuals from joining together as a class to bring suit against their employers.

Notably, the DOJ explicitly addressed its revised stance, stating that while it had “previously filed a petition… on behalf of the NLRB, defending the Board’s view” concerning the enforceability of class action waivers, “[a]fter the change in administration, the [DOJ] reconsidered the issue and has reached the opposite conclusion.” As a result of this new position, the NLRB is no longer represented by the U.S. Solicitor General in the matter, and is now representing itself in the three consolidated cases.

The impact of this ideological shift on the cases before the Supreme Court is unclear. In a case involving statutory interpretation – here the scope of the Federal Aviation Administration (FAA)versus the scope of Section 7 of the NLRA – congressional intent and the plain language of the competing statutes, rather than a DOJ opinion, will likely drive the ultimate resolution of these cases. All employers who use or are considering using class action waivers should keep a close eye on this case. We will provide an update once the Supreme Court rules on this matter.

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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