Categories: Collective Actions

By Jill Barbarino

On October 28 a three-member majority of the National Labor Relations Board in Murphy Oil revisited and reaffirmed its position that employers violate the National Labor Relations Act (the “Act”) by requiring employees covered by the Act (virtually allnonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

As previously reported in an Act Now Advisory, in 2012 the NLRB held in D.R. Horton that the home builder unlawfully interfered with employees’ Section 7 right to engage in concerted activity by requiring them to sign an arbitration agreement prohibiting class or collective claims in any judicial or arbitral forum.  As we have also previously reported, however, on December 3, 2013, the Fifth Circuit rejected the NLRB’s position and held that the Act does not prohibit employers from requiring employees to sign class or collective action waivers.  The Second Circuit and the Eighth Circuit have likewise rejected the Board’s position.

Notwithstanding having “no illusions” that the Board’s decision would be the “last word on the subject”, in a 59-page decision, it reiterated and endorsed its prior position and addressed its critics head on, including the two lengthy dissents from Members Harry Johnson and Philip Miscimarra.

The Decision

Murphy Oil is the owner and operator of over 1,000 retail fueling stations.  Prior to March 6, 2012, Murphy Oil required all job applicants and current employees to execute a “Binding Arbitration Agreement and Waiver of Jury Trial,” which provided in pertinent part that all disputes related to an individual’s employment shall be resolved by binding arbitration and that the parties to the agreement “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.”  The Charging Party, Sheila Hobson, signed this Agreement when she applied for employment in 2008.  Two years later, Hobson filed a collective action pursuant to the Fair Labor Standards Act alleging that Murphy Oil failed to pay her and others for work-related activities performed off the clock.  Murphy Oil moved to compel arbitration and to dismiss the FLSA claims based on the plaintiffs having signed the Agreement.  Hobson, thereafter, filed an unfair labor practice charge and the NLRB’s General Counsel issued a complaint, alleging that Murphy Oil had violated Section 8(a)(1) of the Act.

At the heart of the dispute between the Board and its critics is the interpretation of Section 7 and 8(a)(1) of the Act as well as the application of the Federal Arbitration Act (“FAA”) and Supreme Court jurisprudence interpreting same.

Section 8(a)(1) of the Act states that it “shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees” in the exercise of their Section 7 rights.  Section 7 of the Act states that employees shall have the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]”  

The Supreme Court, on the other hand, in CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 673 (2012), held that where there is no specific “contrary congressional command” as to whether a claim can be arbitrated, the FAA “requires the arbitration agreement to be enforced according to its terms.”   The CompuCredit decision, however, only addressed the enforcement of an arbitration clause that barred access to courts, not a waiver of class or collection actions.  Moreover, the CompuCredit decision was not an employment-related dispute and did not involve the NLRA.  Thus, the specific issue at play in D.R. Horton and Murphy Oil remains unaddressed by the Supreme Court.

The Board’s rationale for upholding D.R. Horton is as follows:

(1)   Section 7 of the Act grants employees the  substantive right to act “concertedly for mutual aid or protection” and mandatory arbitration agreements that bar an employee’s ability to bring join, class, or collective workplace claims restrict this substantive right.

(2)   The conclusion that mandatory class action waivers are unlawful under the Act does not conflict with the FAA or its underlying policies because:

(a)    such a finding treats arbitration agreements no less favorably than any other private contract that conflicts with federal law;

(b)   Section 7 rights are substantive, which means that they cannot be waived under the FAA like procedural rights found in other statutes;

(c)    the “savings clause” in the FAA affirmatively provides that an arbitration agreement’s conflict with federal law is grounds for invalidating an agreement;

(d)   if there is a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act – which prevents private agreements that are inconsistent with the statutory policy of protecting employees’ rights to engage in concerted activity – requires the FAA to yield to the NLRA as necessary to accommodate Section 7 rights.

The Board criticized the Fifth Circuit’s decision for, among other things, giving too little weight to the “crucial point” that “the Board, like the courts, must carefully accommodate both the NLRA and the FAA” and not treat the FAA and its policies as “sweeping far more broadly than the statute or the Supreme Court’s decisions warrant.”

As to Member Johnson’s argument in his dissent that “there was no such thing as a class or collective action in any modern sense when the Act was passed in 1935” the Board majority found this point to be irrelevant because the language of “Section 7 is general and broad.”  As an example, the Board stated that the pursuit of unionization is “obviously protected” through the use of “modern communication technologies such as social media . . . regardless of whether workers during the Depression had access to Facebook.”

The Board also stated that contrary to the suggestion in Member Miscimarra’s dissent, it has not taken the position that the Act creates a guarantee to class certification or the equivalent; it does, however, create a right to “pursue joint, class or collective claims if and as available, without the interference of an employer-imposed restraint.”

What Does This Mean for Employers

After Murphy Oil, it is clear that the Board’s position and the position of at least some federal courts on this issue remain at odds.  If employers require employees covered by the Act to sign class action waivers, they should be aware that it could take significant time and money to ultimately have such an agreement upheld in federal court.  Clearly the last word on this issue will come only when the Supreme Court, as it is likely to do, considers the issue.  Until then employers that require such waivers should recognize that challenges through unfair labor practice charges will remain a fact of life.

Back to Wage and Hour Defense Blog Blog

Search This Blog

Blog Editors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Wage and Hour Defense Blog posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.