Justice Department Switches Sides in High Court Arbitration Fight

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Lawrence E. Dubé, Ben Penn, and Hassan A. Kanu

The Trump administration sided with employers in a U.S. Supreme Court battle over employment agreements that restrict employees from participating in class and collective lawsuits or arbitrations ( Murphy Oil USA, Inc. v. NLRB , U.S., No. 16-307, amicus brief 6/16/17 ).

The Justice Department is now rejecting the position of the National Labor Relations Board and several federal courts that enforcing arbitration agreements that shut off employees’ ability to join together in employment-related lawsuits violates workers’ right to engage in “concerted” activity under federal labor law.

It’s an “unprecedented” action, according to Celine McNicholas, who served as the NLRB’s director of congressional and public affairs and as special counsel during the Obama administration.

“Literally the Trump administration’s top attorney has decided to switch sides and argue on behalf of the employer against workers’ rights to collectively act under the National Labor Relations Act,” said McNicholas, who is now labor counsel for the Economic Policy Institute, a think tank that describes itself as focused on including the needs of low- and middle-income workers.

In the new filing, Acting Solicitor General Jeffrey B. Wall acknowledged that the Justice Department originally supported the NLRB’s legal theory, but he said that after the change in administrations, the Office of the Solicitor General “reconsidered the issue and has reached the opposite conclusion.”

“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,” Wall wrote in its amicus brief filed in the case. The government filed its new amicus brief in Murphy Oil, as well as in Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris , two private cases that also raise the arbitration issue.

The new position is an about-face from September 2016, when the Obama administration’s Justice Department defended the NLRB’s position in a petition to the Supreme Court.

The Department of Justice did not immediately reply to a request for comment on its filing, but the government is not requiring the NLRB to back away from its petition for Supreme Court review, and it has not suggested the court dismiss any of the pending cases. Instead, the acting solicitor general has authorized the board to represent itself in the Supreme Court.

NLRB Associate General Counsel John Ferguson, who heads the NLRB’s Division of Enforcement Litigation, will now be the NLRB’s counsel of record before the Supreme Court.

Divided Opinion on Propriety, Impact

Immediate reaction to the Justice Department move was divided.

McNicholas said NLRB attorneys are very talented and capable of handling a Supreme Court case, but they will be arguing against DOJ attorneys who regularly appear before the high court. “That is going to have an impact on the way the case goes.”

But Andrew J. Pincus, a Mayer Brown LLP partner who has argued 27 cases before the Supreme Court, had a different view of the development.

“Independent agencies” like the NLRB “are independent” and they sometimes have views different from the Executive branch, Pincus told Bloomberg BNA.

DOJ changes of position like the one in Murphy Oil don’t occur often, but they have happened in several non-labor cases before the high court, Pincus said.

The acting solicitor general’s step was “totally appropriate” because his job is to represent the interests of the United States, Pincus said. In cases where those interests appear to clash with an agency’s view, Pincus said, “the most responsible way to reconcile them is to say to the independent agency ‘you can represent yourself, we won’t silence you, but we have a duty to the president and his office to represent his appointees’ views.’”

Pincus predicted the Supreme Court will decide the mandatory arbitration issue based on its own statutory interpretation. “The Supreme Court is not going to decide this case in a particular way just because the United States filed a brief urging it to do so.”

The DOJ under President Barack Obama said in its September 2016 filing that “the ability to engage in concerted activities under the NLRA is not a mere procedural means for vindicating some other statutory right” but is a fundamental right at the center of the NLRA and its labor policy.

The petition, signed by NLRB officials and then-Deputy Solicitor General Edwin S. Kneedler, argued the Federal Arbitration Act generally favors arbitration agreements, but it doesn’t require enforcing an agreement that violates the NLRA. As a result, the government told the high court the NLRB properly found that Murphy Oil USA, Inc., a convenience store operator, violated employees’ labor law rights when it required them to waive the right to bring class or collective lawsuits or arbitration proceedings.

The government argued that it would be important for the Supreme Court to settle an issue that has divided lower courts. The high court agreed in January to hear the Murphy Oil case, as well as two other cases where the validity of class action waivers was disputed in private lawsuits.

Briefing has not been completed in any of the three cases, and the court has not scheduled oral arguments.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com; Ben Penn in Washington at bpenn@bna.com; Hassan A. Kanu in Washington at hkanu@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Chris Opfer at copfer@bna.com

For More Information

Text of the amicus brief is available at http://src.bna.com/pW4

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law