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Protect Employment Arbitration Agreements
The Trump administration, with new appointees at the National Labor Relations Board (NLRB or Board), can end the Obama Board’s years-long war on class action waivers and reaffirm the legality of arbitration agreements in employment contracts. Congress can also pass legislation that would prevent a future Board from once again trying to outlaw arbitration agreements.
Many employers utilize arbitration agreements to provide for timely resolution of workplace disputes, which benefits employees and limits costly and needless class action litigation. The Obama NLRB, however, claimed that these agreements violated workers’ rights to engage in “concerted activity” under the National Labor Relations Act (NLRA). That position was not consistent with the NLRA and conflicted with the fundamental principles of another federal statute, the Federal Arbitration Act (FAA).
- The right to engage in concerted activity means that employees can have discussions about workplace issues like pay and benefits, jointly raise issues of concern with their employer, and collectively bargain. The Obama NLRB, however, expanded its view of concerted activity to include the “right” to file class action lawsuits.
- However, the FAA was passed specifically to protect the use of arbitration agreements. The Supreme Court has repeatedly ruled that other statutes should not interfere with the purpose of the FAA, and has ruled that employment claims are subject to arbitration agreements.
- As the Supreme Court noted in a recent case upholding the use of arbitration agreements, arbitration results in the “cheaper and more efficient resolution of disputes.”
- Nothing in the statutory text, legislative history, or the Board’s prior decisions establishes that the NLRA creates a substantive right for employees to initiate class actions. In fact, the Obama NLRB created a novel “right” that is ungrounded in the law.
- As the Supreme Court has repeatedly held, the NLRB may not impose policies that disregard or invalidate other federal policies and legislation. Yet by striking down arbitration agreements, the NLRB did just that with regard to the FAA.
- The U.S. Courts of Appeals for the Second, Fifth, and Eighth Circuits have upheld the legality of employment class action waivers, while the Seventh and Ninth Circuits have sided with the Obama NLRB. This circuit split likely will be resolved by the Supreme Court, which will hold oral arguments on the issue in October 2017.
If class action waivers in employment contracts are ruled unlawful, employees will face delays in settling workplace disputes, and employers will face costly and needless class action litigation. The winner will be the trial lawyers, who could file more lawsuits.
Once the Trump administration's nominees to the NLRB have been confirmed, the Board should:
- Overturn the Obama Board’s anti-arbitration decisions, such as D.R. Horton.
Congress should pass legislation that:
- Amends either the FAA or the NLRA to clarify that employment arbitration agreements are lawful.