NLRB Asserts Itself on Arbitration

Over the past twenty years, the issue of enforceability of arbitration agreements in the employment context has been repeatedly debated and litigated in the courts. It appears that no other employment issue has generated as many judicial decisions. Generally, the federal courts have tended to find employment arbitration agreements enforceable under the Federal Arbitration Act (FAA). On the other hand, California state courts have limited the enforceability of the agreements when possible. The National Labor Relations Board (NLRB or Board) has also been hostile to arbitration. The debate and disagreement continues.
On October 28th the NLRB reaffirmed its stance on class action waivers in arbitration agreements. In the case of Murphy Oil USA, Inc. v. Shelia M. Hobson, the Board ruled in a 3-2 decision that a class action waiver in an arbitration agreement violates section 8 of the National Labor Relations Act. The NLRB had previously made the same ruling in the D.R. Horton, Inc. case. The Board’s decision in D.R. Horton was subsequently rejected by multiple federal appeals courts. Nevertheless, the Board used the Murphy Oil case to specifically tell the federal courts that they were wrong and the Board is right. The attorneys for Murphy Oil will likely be able to have the NLRB decision overturned, but it will be costly and time-consuming for the company. It appears that Board Member Harry I. Johnson, III has the most reasoned understanding of the legal issue and the extent of NLRB authority. He concluded his dissent as follows:
The Act provides employees with strong and important protections when they discuss terms and conditions of employment, decide together on a plan of action to seek improvements in those conditions, and concertedly present their grievances to their employer, an arbitrator, or a court. The Board, alone, protects employees against job-related reprisals when they act concertedly in these respects, and thereby bring the strength of the group to bear on the dispute. These are important rights, and I am committed to their vigorous enforcement. While the Act protects employees when they walk together into the door of the courthouse or the arbitration hearing, under the Federal Arbitration Act, what happens there is the business of the court or the arbitrator and may legitimately be governed by individual arbitration agreements like those at issue in this case. Today’s decision, like D. R. Horton before it, fails to respect that principle. Indeed, the fundamental premise of the majority opinion is that any conflict between the Act and the FAA should be resolved in favor of the Act, which they term “sui generis,” and that they are entitled to keep insisting on this view until the Supreme Court itself directly orders them to stop. As to the former rationale, the Supreme Court has consistently resolved conflicts between the Act and other Federal laws in favor of the other statute, even while it has consistently resolved purported “conflicts” with the FAA, based on generalized language, in favor of the FAA. Taking this all in, no reason exists to believe that the Act’s generalized provisions will prevail over the FAA, especially given that statute’s vigorous enforcement in the unbroken string of recent Supreme Court opinions noted above.
As to the majority’s latter rationale of non-acquiescence, it is certainly true that the Board is not required to acquiesce in adverse decisions of lower courts. Tellingly, however, both of the cases cited by the majority for this proposition involved only issues of the proper interpretation of the Act. The rationale for non-acquiescence—the Board’s statutory role in the interpretation of the Act and the fact that the only court authorized to interpret the Act for the entire country is the Supreme Court—has no application whatsoever to the proper interpretation of the Federal Arbitration Act, the Federal Rules of Civil Procedure, the Fair Labor Standards Act, the Norris-LaGuardia Act, and the Rules Enabling Act. Interpretation of those laws is the province of the courts, and with the courts nearly universally rejecting the D. R. Horton theory, the Board should defer to their rulings.