Supreme Court Hears Arbitration Case | U.S. Chamber of Commerce

Supreme Court Hears Arbitration Case

The United States Supreme Court on October 2 heard oral arguments in a trio of closely-watched cases involving employee agreements that contain mandatory arbitration provisions, which the National Labor Relations Board (NLRB) declared unlawful in its errant D.R. Horton decision.  The three cases—NLRB v. Murphy Oil, USA; Epic Systems Corp. v. Lewis; and Ernst & Young LLP v. Morris—will conclude a years-long legal tug-of-war over this issue in which the NLRB thumbed its nose at several federal circuit court decisions rejecting its interpretation of the law.

As this blog reported nearly six years ago, in 2012 the NLRB ruled against D.R. Horton, a nationwide homebuilder whose employment agreements contained a commonly-used binding arbitration clause prohibiting class actions to avoid costly litigation.  In its ruling, the NLRB demonstrated its bias against employers (as it was wont to do during the Obama administration) by asserting an expansive reading of the National Labor Relations Act (NLRA) and insisting that the NLRA should trump other acts of Congress.

In its decision, the Board held that the NLRA’s protection of collective action in dealing with workplace disputes essentially superseded longstanding judicial understanding that class actions are not truly a substantive right, but merely one option among many for seeking redress of a claim.  Moreover, it ignored a 2011 U.S. Supreme Court decision that deemed arbitration agreements as legally enforceable contracts between two consenting parties.

After D.R. Horton, the NLRB went on a crusade to take down similar arbitration agreement language in a series of cases that distorted the law like a funhouse mirror.  Eventually, several of those cases ended up in various federal courts, as well as the California Supreme Court, all of which initially refused to accept the NLRB’s position outright.  Indeed, the Second, Eighth, and even the famously liberal Ninth Circuit expressly declined to follow the logic of D.R. Horton.  In December 2013, the Fifth Circuit Court of Appeals joined the list and issued a stinging opinion smacking down the NLRB’s unsupportable position.

Notwithstanding those court decisions, the NLRB blithely continued along while improperly applying its “non-acquiescence” policy, under which the Board declines to follow a circuit court ruling until that ruling is upheld by the Supreme Court.  Ultimately, the Board did find two circuit courts to rule in its favor, thus creating the circuit split that led to this week’s hearing.

In January 2017, the Supreme Court granted review of the NLRB’s petition for certiorari in Murphy Oil along with the other two cases. However, in June the Solicitor General filed a brief with the Supreme Court reversing the United States government’s previous position and informing the court that the NLRB’s reasoning was incorrect, thus leaving the NLRB’s General Counsel, Richard Griffin, to argue the case on behalf of the NLRB.  In another interesting facet of the case, Griffin, who supports the previous majority’s D.R. Horton precedent, continued to represent the Board despite a newly-minted Republican majority that presumably does not. 

In any event, while interesting, none of that kept the case from proceeding, which will allow the Supreme Court finally to settle this issue.  One hopes that the justices will side with the majority of their appeals court colleagues and rule that the NLRB’s bizarro world interpretation of the law under D.R. Horton should be reversed for once and for all.