On The Case

In SCOTUS class waiver case, DOJ, employers say don’t trust NLRB

(Reuters) - A big question went unasked at the Supreme Court on Monday, when the justices opened their new term with oral arguments in a three cases that will decide whether employers can require employees to agree to individual arbitration of employment disputes. Though several justices were so engaged that Chief Justice John Roberts had to step in to stop his colleagues from interrupting one another, no one asked Deputy Solicitor General Jeffrey Wall to explain why the Justice Department switched sides on the issue after President Donald Trump took office, leaving the National Labor Relations Board as the lone government agency to argue (2017 WL 3447770) that mandatory individual arbitration provisions are illegal under the National Labor Relations Act.

Wall implicitly answered the question anyway. So did Paul Clement of Kirkland & Ellis, who argued on behalf of the private employers in the three cases, Murphy Oil, Epic Systems and Ernst & Young. According to Wall and Clement, the Justice Department’s position is actually consistent with 70 years of NLRB history. They said repeatedly that it was the Obama administration’s labor board that changed sides when it held for the first time in 2012 that mandatory individual arbitration provisions abridge employees’ rights to act in concert.

“For 77 years, the board did not find anything incompatible about Section 7 (of the NLRA) and bilateral arbitration agreements, and that includes in 2010 when the NLRB general counsel looked at this precise issue,” Clement said in response to Justice Stephen Breyer’s concern that such agreements undermine workers’ rights dating back to the New Deal. Clement said the NLRB had at least two chances in old Supreme Court cases to argue that restrictive arbitration agreements violate the National Labor Relations Act, “but no dog barked.”

Deputy SG Wall echoed Clement’s point. Only in 2012, in a case called NLRB v. D.R. Horton (2012 WL 36274), did the NLRB begin to argue that the National Labor Relations Act trumps employers’ rights to require arbitration under the Federal Arbitration Act. “D.R. Horton was the first to make that move, and that’s a pretty radical move, to say for the first time that NLRA overrides those other statutes,” Wall said.

Robert Griffin, the NLRB’s general counsel, pushed back against Clement and Wall in his turn before the justices. “With due respect to my colleagues, that’s an inaccurate summary of the board’s precedent,” Griffin said in response to a softball question from Justice Ruth Bader Ginsburg. “The board’s precedent has always said that individual agreements that require employees to individually waive their right to proceed collectively are violations of the National Labor Relations Act.”

Griffin also said a 2010 memo by the NLRB’s former general counsel, which Clement cited as proof that the NLRB abruptly changed its position on individual arbitration in the 2012 D.R. Horton case, “was never adopted by the board as the law of the board and, in fact, was explicitly rejected in the Horton decision.” Griffin’s argument, boiled down, is that the D.R. Horton case was the NLRB’s first opportunity explicitly to address the legality of a mandatory employment agreement requiring employees to arbitrate individually, and since then, the board has consistently said such agreements are illegal.

Of course, as everyone knows, the current NLRB is not the same as the board that believed so firmly in employees’ right to classwide arbitration under the NLRA. President Trump’s nominees have given the NLRB a Republican majority. Griffin himself is scheduled to leave the general counsel’s office next month, according to an Ernst & Young Supreme Court reply brief (2017 WL 4005674).

So the subtext of the discussion about the NLRB’s position seems to me to be that even independent executive branch agencies change their minds when administrations change – a perhaps unremarkable observation except when the Supreme Court is considering how much credence it should place in an agency’s legal reasoning. I should point out that two of the three employment arbitration cases before the court involved private disputes, not the government. In those cases, University of Virginia law professor Daniel Ortiz argued for employees. But employees who have challenged mandatory arbitration since the NLRB’s D.R. Horton decision have generally adopted the board’s analysis of the intersection between workers’ rights and the FAA.

In other words, it’s good strategy to for employers to discredit the NLRB by subtly implying the board’s position is politically motivated rather than grounded in genuine legal interpretation. As my Reuters colleague Lawrence Hurley reported Monday after the argument, the justices seemed divided along their typical ideological lines. Justices Breyer, Ginsburg, Sonia Sotomayor and Elena Kagan asked questions suggesting allegiance with employees. Justices Samuel Alito and Anthony Kennedy, as well as Chief Justice Roberts, seemed inclined to agree with Wall and Clement. Justice Clarence Thomas, as usual, asked no questions.

Nor did Justice Neil Gorsuch, contradicting his fast-developing reputation for volubility during oral arguments. I may be overinterpreting Justice Gorsuch’s silence, but I think it’s an ominous sign for employees. We already know from his time on the 10th U.S. Circuit Court of Appeals that Justice Gorsuch is leery of placing faith in executive agencies rather than in textual language. Clement and Wall gave him plenty of reason to be wary of the NLRB’s arguments by emphasizing that the board historically read the National Labor Relations Act differently than it did in the D.R. Horton case.

If Gorsuch turns out to be the deciding vote on mandatory individual arbitration, employees are probably in trouble.