Quote of the Day, Feb. 7, 2017

“If you are neutral in situations of injustice, you have chosen the side of the oppressor.  If an elephant has its foot on the tail of a mouse, and you say that you are neutral, the mouse will not appreciate your neutrality.”
— Archbishop Desmond Tutu

Class Action Bans and Protected Concerted Activity (Part I)

The U.S. Supreme Court has granted certiorari — which means it has decided to review — three cases that raise the question of whether an employer violates the National Labor Relations Act (“NLRA”) by prohibiting its employees from filing a class action or a collective action, generally as part of a scheme of forced arbitration.  This requires extended discussion, more than I can include in a single post.

For decades, the Supreme Court has approved the use of arbitration as a way of settling labor-management disputes.  This is separate from the scheme involved in the cases now before that court.  In fact, unionized employees enjoy greater protection against the use of arbitration to ban class actions than non-unionized employees.

Congress enacted the Federal Arbitration Act (“FAA”), 9 U.S.C. secs. 1, et seq., in 1925.  That statute makes any “written provision in … a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction” enforceable.  9 U.S.C. sec. 2.  However, that statute provides that it does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  9 U.S.C. sec. 1.

The Supreme Court decided, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), that the Age Discrimination in Employment Act does not bar employers from requiring arbitration of disputes arising under that statute.  And one decade later, that court held that the FAA applies to employment contracts not covered by the specific exemptions for transportation workers.  Circuit City Stores v. Adams, 532 U.S. 105 (2001).

Many employers then unilaterally instituted policies requiring their employees to arbitrate any disputes arising out of their employment.  (That does not apply to arbitration provisions in union contracts, also known as collective bargaining agreements, since those agreements must be negotiated with labor unions and must be ratified by those unions’ members.)

Some employers then inserted language in those policies, barring employees from bringing multi-plaintiff cases or class or collective actions in arbitration or in court.  The Supreme Court, in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011), held that those class-action bans were enforceable.  Specifically, the court held that the FAA preempted California’s Discover Bank rule, which invalidated arbitration contracts that barred class actions, at least in consumer contracts in which one party used its superior bargaining power in drafting the agreement and in which each dispute involves a small amount of damages per person.

That’s where we thought the law was, until the National Labor Relations Board began ruling that such class-action bans violated employees’ rights under the National Labor Relations Act.  I will discuss those rulings in Part II of this blog post.

Whistleblower Protection Act

It can be difficult to understand the significance of recent developments in the new Trump Administration without knowing about whistleblower law for federal employees.  Let us use this as a teaching moment.

On Jan. 24, 2017, employees in several federal agencies reportedly were told not to issue news releases, tweet, make policy pronouncements, or otherwise communicate with the outside world without the prior approval of those agencies’ management.  There was some backpedaling from the Administration, and it was not clear in any event whether these restrictions were temporary or permanent.

This ban — especially if it is made permanent — could have significant effects at these agencies.  One of the most significant impacts is that this ban could violate the Whistleblower Protection Act.  That is not a new statute.  It was passed in 1989 and was amended in 2012.

Under 5 U.S.C. 2302(b)(8), most federal agencies cannot take a “prohibited personnel action” against almost any employee of or applicant for employment with that agency because that employee or applicant has disclosed information (including to Congress and to the news media) that s/he reasonably believes evidences “any violation of any law, rule, or regulation” or “gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety.”

There are exceptions for disclosures that are specifically prohibited by law, as well as disclosures of secrets because of national security or the conduct of foreign affairs.  (Since the NSA is exempted from this statute, Edward Snowden could not rely on this law as a defense to any legal proceedings based on his disclosures.)

As one federal agency has explained, retaliation against a federal employee whistleblower, in violation of the WPA, can lead to an investigation and can be the basis of an appeal from an adverse action against the employee.  In other words, communication bans against federal employees have limits.

It is too early to tell whether federal agencies will retaliate under Trump against employees who disclose waste, fraud or abuse.  Mr. Trump and the people he has appointed should not expect federal employees to blindly follow communication bans.  Those who are pushed can and will push back.

The Rule of Law

Who is Sally Q. Yates?

She is the daughter of a Georgia appellate judge, a magnum cum laude graduate of the Georgia School of Law, the executive editor of the Georgia Law Review, a lawyer with the corporate law firm of King & Spaulding, a lawyer in the U.S. Department of Justice for more than 27 years, the Deputy Attorney General of the United States, and the Acting Attorney General — until yesterday.

On Jan. 27, Pres. Trump issued his executive order, which temporarily suspends the issuance of visas from seven overwhelmingly Muslim-majority countries and indefinitely suspends the entry of Syrian nationals, among other things.  Protests erupted at more than two dozen airports in the United States.  As of the writing of this post, four different federal district judges and magistrate judges have issued stay orders against enforcement of that executive order.

Lawyers for persons covered by this executive order have claimed, as outlined in one of the cases, that it “exhibits hostility to a specific religious faith, Islam, and gives preference to other religious faiths, principally Christianity.”  The executive order is both under-inclusive — it doesn’t affect visas or entry from Saudi Arabia, for example, the home of almost all of the 9/11 attackers — and over-inclusive — it includes everyone from those countries, without regard to their actual life histories.  And Pres. Trump has said that he wants to give priority to Christian refugees.

Sally Yates, then Acting Attorney General, did what she told Sen. Jeff Sessions at her confirmation hearing — she informed other Justice Department attorneys not to enforce this executive order because she did not believe it is lawful.  Specifically, she said: “At present, I am not convinced that the defense of the executive order is consistent with these responsibilities of the Department of Justice, nor am I convinced that the executive order is lawful.”

Within hours, Pres. Trump fired her.  A statement released by the  White House, in extraordinary language, accused her of having “betrayed the Department of Justice by refusing to enforce a legal order designed to protect the citizens of the United States.”  It also claimed that she was “an Obama Administration appointee who is weak on borders and very weak on illegal immigration.”  Although it claimed that the DOJ’s Office of Legal Counsel had vetted the order, it did not note that that review did not include the anti-Muslim statements made by the President on the same day he signed it.

This decision to fire Ms. Yates is exceptionally troubling for those who maintain that the United States is a nation of laws.  The President can nominate an attorney general, but the attorney general is not his personal attorney.  The Attorney General is responsible to “furnish advice and opinions, formal and informal, on legal matters to the President and the Cabinet and to the heads of the executive departments and agencies of the government, as provided by law.”  That does not necessarily mean advice that the President likes.  If the Attorney General believes that a Presidential order is unconstitutional or otherwise unlawful, she or he must be able to provide that advice without fear of punishment.

It is still an open question whether this Administration intends to obey the law.  Last night’s actions are not a good sign.

Trump’s regulatory executive order

Today, President Trump issued a new executive order, which he claimed would reduce the number and impact of federal regulations on private businesses.  Among other things, this executive order would require, in Fiscal Year 2017 (which ends on Sept. 30, 2017), that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.”  It would also impose new limits on new regulations issued in and after Fiscal Year 2018.  This new executive order raises a number of thorny questions, which include:

  1.   Why does this executive order require consideration of only the “incremental costs” of new or revised regulations, and not the benefits of those regulations.  Yes, we know there are ideological reasons for this new executive order, but is that the only justification?  Presumably, the new Administration favors some new regulatory action, such as possible restrictions on H1-B visas. If ICE were to propose a regulation requiring such action, would it also have to propose repealing two other regulations in order to offset the incremental cost of that regulation?  What if the FDA were to propose a new rule that would protect the public health, with some increase in the cost to food producers?  Would it also have to propose eliminating two other regulations that protect the public health?
  2. Is this authorized by Congress?  Does it need Congressional approval?  While the Reagan Administration required agencies to use a cost-benefit analysis for new rules, it did not require the repeal of existing regulations to offset the incremental cost of those new rules.  Clearly, Congress can overrule this executive order.  But does Congress need to amend the Administrative Procedure Act to impose this new requirement?
  3. The federal government must issue a notice of proposed rule-making, receive comments from the public, and consider those comments both when issuing a new regulation and when repealing one.  See 5 USC 551(5).  (It also must do the same when it modifies an existing rule.)  In Fiscal Year 2017, an agency will need to undergo this elaborate, time-consuming and expensive process for three different regulations whenever it proposes one new rule.
  4. Starting with Fiscal year 2018, each agency will be required to identify each offsetting regulation annually, with the costs or savings associated with each new or repealed regulation.  The Director of Management and Budget will approve the new regulations that each agency can issue; no agency can issue a new regulation unless it receives that approval.  And the Director will impose a limit on the incremental costs for new or repealed regulations.  That allowance could mean a decrease in the agency’s regulatory costs.
  5. This new executive order will have two predictable impacts.  First, it will give vast new powers to the Director of Management and Budget.  That person could decide, for example, that the total regulatory costs for IRS or EPA regulations for Fiscal Year 2018 will be zero, even if that leads to rampant tax avoidance and runaway federal deficits, or if that leads to increased incidents of illness and death.  The agencies would be powerless to overcome those decisions.  And, second, it will significantly increase the workload on federal agencies, even though the Administration has imposed a hiring ban on those agencies.  In other words, Pres. Trump just issued a Full Employment for Bureaucrats rule.
  6. It is not clear that the Trump Administration sought the input of federal agencies before imposing these new limits.  Given its failure to consult with even Homeland Security over its recent immigration changes, it seems doubtful that it did so.

This executive order appears to have been prepared in haste, without regard for the negative impacts of these new limits.  It is likely that its rollout will be chaotic and confusing.