Class Action Bans and Protected Concerted Activity (Part III)

The principal arguments for the Fifth Circuit’s position that the Federal Arbitration Act (“FAA”) preempts the National Labor Relations Act (“NLRA”) in this area are contained in that court’s earlier decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). Those arguments are that a prohibition on class-action waivers would discourage arbitration, contrary to the purpose of the FAA; that the NLRA does not expressly state that it overrules the FAA; and that modern class action practice began in 1966, more than 30 years after Congress enacted the NLRA.

That analysis ignores the fact that protection of employees’ right to engage in concerted activity is at the very heart of the NLRA.  The specific prohibitions in section 8(a) of the NLRA, 29 USC sec. 158(a), are based on the right to engage in concerted activity set forth in section 7 of the Act, 29 USC sec. 157.  The specific forum in which these employees want to engage in that concerted activity is different from the workplace settings specifically considered when Congress enacted the NLRA in 1935.  But the fact that the current struggles occur in a legal setting, rather than on the picket line, and use motions and briefs, not strikes, should make no difference.

The issue of class actions, in contrast, is peripheral to the FAA.  Many arbitration cases right now are class arbitrations.  A class arbitration takes more time and is procedurally more complex than an individual arbitration.  But a class arbitration for, say, 50 employees is more efficient than 50 individual arbitration cases.

The fact that the the text of the NLRA does not contain an explicit override of the FAA should make no difference.  Congress can be forgiven for not including any such provision in the NLRA, since the FAA states 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 USC sec. 1.  It is likely that Congress did not think the NLRA conflicted with a statute that said it didn’t apply to these contracts of employment.

In addition, labor unions and employers have long used arbitration as a means of resolving disputes under collective bargaining agreements.  However, those arbitration cases can involve what essentially are class claims, such as a dispute over an employer’s alleged failure to pay contractual wages to tens, or hundreds, or thousands of union member-employees.  It is disingenuous to claim that an employer can prohibit employees from filing a class arbitration, even while it participates in class arbitrations filed by those same employees’ labor union.

The fact that Rule 23 of the Federal Rules of Civil Procedure, which sets forth the procedures for class actions, did not contain those procedures until 1966 should make no difference.  That would be like arguing that the NLRA cannot prohibit an employer from forbidding its employees to discuss workplace issues via e-mail, since e-mail did not exist in 1935.  The specific method of concerted activity might be new, but the protections for concerted activity have been central to labor law for more than 80 years.

A fair reading of these two statutes should support the NLRB’s decisions in these cases.  However, it is not clear that such a fair reading will receive the approval of a majority of the current eight-justice Supreme Court.  And it is not clear just how any new Justice on that Court, whether it is Judge Neil Gorsuch or anyone else, would rule in these three cases.

Why is this important?  Tune in for Part IV.

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