The long-running battle over collective action waivers in the arbitration clauses of employment agreements continues to rage in the Courts of Appeals. Two recent decisions (and the cert petitions filed in their wake) may well lead the Supreme Court to consider once again the thorny relationship between the class/collective action mechanism and federal arbitration law.
Just weeks ago, a divided panel of the Ninth Circuit delivered its opinion in Morris v. Ernst & Young, LLP, vacating an order by the N.D. Cal. that would have compelled individual arbitration of claims that the defendant misclassified employees in order to deny them overtime wages. The panel majority went out of its way to emphasize that it had no qualms with such disputes being sent to arbitration—or to any number of other, more inventive forms of alternative dispute resolution:
The illegality of the “separate proceedings” term here has nothing to do with arbitration as a forum. . . . The same infirmity would exist if the contract required disputes to be resolved through casting lots, coin toss, duel, trial by ordeal, or any other dispute resolution mechanism, if the contract (1) limited resolution to that mechanism and (2) required separate individual proceedings. The problem with the contract at issue is not that it requires arbitration; it is that the contract term defeats a substantive federal right to pursue concerted work-related legal claims.
Circuit Judge Sandra Ikuta’s vigorous dissent, which called the majority’s opinion “breathtaking in its scope and in its error,” rejected that analysis. Instead, she traced a common thread through the Supreme Court’s many decisions enforcing arbitration clauses, finding that “the Supreme Court consistently rejects claims that a ‘contrary congressional command’ precludes courts from enforcing arbitration agreements according to their terms, including when such agreements waive the use of class mechanisms.” In other words, if the claimed statutory rights at issue in Gilmer, CompuCredit, and Italian Colors didn’t cut it for the Supreme Court, neither does the National Labor Relations Act’s right to “concerted activities.”
The dissent in Morris is hardly a lone voice in the wilderness. In its decision late last year in Murphy Oil USA, Inc. v. NLRB, the Fifth Circuit reiterated its previously articulated stance that “(1) the NLRA does not contain a ‘congressional command overriding’ the Federal Arbitration Act . . . and (2) ‘use of class action procedures . . . is not a substantive right’ under Section 7 of the NLRA.”
These divergent outcomes are now the subject of parallel cert petitions in Morris and Murphy Oil. Unsurprisingly, each petition cites the other Court of Appeals decision. Time—and perhaps the volume of amicus curiae briefs sought to be filed—will tell whether the Supreme Court decides to use one or both of these cases as an opportunity to clarify what statutory rights, if any, can override the Federal Arbitration Act’s national policy favoring arbitration.