DOJ Flips on Class Waivers Issue

On Friday, the United States Department of Justice (“DOJ”) made an abrupt about-face on the issue of whether a class waiver included in an employer’s arbitration agreement violates the National Labor Relations Act (“NLRA”).  Currently, the United States Supreme Court is considering the issue in the consolidated cases of National Labor Relations Board v. Murphy Oil USA, No. 16-307 (5th Cir., October 26, 2015), Epic Systems Corp. v. Lewis, No. 16-285 (7th Cir., May 26, 2016), and Ernst & Young LLP v. Morris, No. 16-300 (9th Cir., August 22, 2016).  Previously, the Seventh and Ninth Circuits sided with the National Labor Relations Board (“NLRB”) and held that a collective action ban included in an employment contract violates the NLRA.  In contrast, the Fifth Circuit rejected the NLRB’s efforts to ban class action arbitration waivers in Murphy Oil.

Previously, the DOJ submitted an amicus brief defending the NLRB’s view that such waivers violate the NLRA.  Last week, however, the DOJ submitted a second brief stating it has reached the opposite conclusion.

In Murphy Oil, this Office previously filed a petition for a writ of certiorari on behalf of the NLRB, defending the Board’s view that agreements of the sort at issue here are unenforceable. After the change in administration, the Office reconsidered the issue and has reached the opposite conclusion. Although the Board’s interpretation of ambiguous NLRA language is ordinarily entitled to judicial deference, courts do not defer to the Board’s conclusion as to the interplay between the NLRA and other federal statutes. We do not believe that the Board in its prior unfair-labor-practice proceedings, or the government’s certiorari petition in Murphy Oil, gave adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the FAA.

In its June 16th brief, the DOJ argues:

• When parties agree to arbitrate employment-related claims bilaterally, the FAA requires enforcement of those agreements;
• The NLRA does not preclude enforcement of an agreement to arbitrate employees’ work-related claims bilaterally;
• Bilateral arbitration agreements should be enforced absent a specific congressional command to the contrary;
• The NLRA does not contain a specific congressional command precluding enforcement of plaintiffs’ bilateral arbitration agreements;
• Enforcing the parties’ arbitration agreements in these cases, in accordance with the FAA, would not deprive plaintiffs of any substantive right conferred by another federal statute; and
• The FAA’s saving clause provides no sound basis for declining to enforce the parties’ arbitration agreements.

The DOJ’s new amicus brief concludes by stating the judgments of the courts of appeals in both Epic Systems and Ernst & Young should be reversed while the judgment in Murphy Oil should be affirmed.

Although the DOJ brief is unlikely to have much impact on the high court’s ultimate decision in the consolidated cases, the Department’s abrupt U-turn in a pending Supreme Court case is both interesting and unusual.

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