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.