Third Appellate Court Backs NLRB, Says Class Action Waivers Illegal

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By Lawrence E. Dubé

An employer illegally required satellite TV technicians to sign arbitration agreements that blocked them from pursuing job-related class or collective lawsuits and arbitrations, the U.S. Court of Appeals for the Sixth Circuit held May 26 ( NLRB v. Alt. Entm’t, Inc. , 2017 BL 177897, 6th Cir., No. 16-1385, 5/26/17 ).

Judges Karen Nelson Moore and Helene N. White agreed with the National Labor Relations Board that Alternative Entertainment Inc.'s mandatory arbitration agreements interfered with employees’ right to engage in concerted activity for their mutual aid or protection. In the first Sixth Circuit case on the issue, the court 2-1 enforced an NLRB order requiring AEI to rescind or revise its arbitration policy.

The NLRB, which originally had no federal appellate courts endorsing its position on class waivers, now has the backing of the Sixth, Seventh, and Ninth circuits. The U.S. Supreme Court has agreed to review the issue and is expected to hear arguments in several cases this fall.

The Fifth and Eighth circuits have held that the NLRB’s view of class waivers runs afoul of the Federal Arbitration Act. But in the present case, Moore and White said the National Labor Relations Act and the FAA “work in harmony” and an arbitration agreement that violates the NLRA isn’t enforceable under the arbitration act.

AFL-CIO General Counsel Craig Becker, who represented the labor federation as an amicus curiae supporting the NLRB, told Bloomberg BNA May 30 he was “very gratified” that the Sixth Circuit enforced the NLRB order. Becker noted that of the four appellate courts that have closely examined the board’s legal theory, three have agreed with the board’s analysis.

Timothy J. Ryan, an attorney who represented AEI, told Bloomberg BNA he was disappointed by the court’s decision but complimented the dissenting opinion as a “better and stronger” statement of an issue that will ultimately be resolved by the Supreme Court. Ryan is a principal in the Grand Rapids, Mich., office of Jackson Lewis P.C.

Ruling Backs Labor Board on Class Waivers

The NLRB first held five years ago in D.R. Horton, Inc. that a class action waiver illegally interferes with the right of employees under the NLRA to engage in concerted activity.

When the Fifth Circuit disagreed in NLRB v. Murphy Oil USA, Inc. , the NLRB asked the Supreme Court to review the class waiver issue, and the high court granted the board’s petition.

The court has also agreed to hear the Seventh and Ninth circuit cases, which are private civil actions in which the courts found class action waivers invalid because of the NLRA.

The FAA makes arbitration agreements enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract.” Moore and White said that any contract that undermines the NLRA right of employees to engage in concerted activity is unenforceable under the FAA.

“Paying due respect to the text of the FAA, including its saving clause, makes clear that the NLRA and the FAA are compatible,” the Sixth Circuit held.

Disputed Issue Already on High Court Docket

Dissenting from the ruling on AEI’s arbitration policy, Judge Jeffrey Sutton said the “straightforward policy” of the FAA “does not contain an exception for labor disputes or for the NLRA.”

Sutton said the NLRB’s position on waivers creates a “bizarre alchemy” in which the board would guarantee employees the right to pursue collective actions under the Age Discrimination in Employment Act or other employment statutes, while those laws don’t forbid voluntary waivers of such rights.

The dissent said employees who sign class waivers can band together to lobby their employer to remove a waiver, and they can ask a court to declare a waiver unenforceable, but the waivers don’t violate the NLRA. “Waivers do not inhibit the right to pursue a goal; they inhibit the ability to obtain it,” Sutton wrote.

Ryan told Bloomberg BNA that AEI is “sorting out” whether it will petition the Sixth Circuit for an en banc rehearing of the case or whether to file a petition for Supreme Court review that could be held in abeyance until the high court decides NLRB v. Murphy Oil.

NLRB attorney Joel Heller in Washington argued for the board. Ryan argued for AEI. Becker argued for the AFL-CIO as an amicus supporting the NLRB, and Evan M. Tager of Mayer Brown LLP in Washington argued for the U.S. Chamber of Commerce as an amicus supporting AEI.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

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

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