By Russ Bleemer

The divisive battle over class waivers associated with mandatory arbitration, settled today in the Supreme Court with strong backing for Federal Arbitration Act supremacy over the National Labor Relations Act, was almost destined for a closely divided Court.

It’s unlikely any Court watchers were surprised by the majority’s 5-4 opinion in Epic Systems Corp. v. Lewis, No. 16-285 (opinion in the consolidated cases is available at https://bit.ly/2rWzAE8), written by Justice Neil Gorsuch, the Court’s newest member, especially in light of the arguments, which kicked off the term last Oct. 2.  [For details on the arguments, see the CPR Speaks: Mark Kantor, “Supreme Court Oral Argument on NLRB Class Actions vs. Arbitration Policy,” (Oct. 2)(available at http://bit.ly/2fLwU9C), and Russ Bleemer, “The Class Waiver-Arbitration Argument: The Supreme Court Transcript,” (Oct. 3) (available at http://bit.ly/2yWjWuf).]

The Court delayed the case from the previous term apparently with an eye to a full Court that would avoid a 4-4 split that would have allowed different laws depending on the circuit decisions.  In the interim, Gorsuch was confirmed.

His opinion today for the majority strongly backs the waivers and employers’ ability to require workplace disputes to be resolved in individual arbitration.  It is summarized on this CPR Speaks blog here: bit.ly/2KEuXFN 

Justice Clarence Thomas’s concurrence is summarized on CPR Speaks here: https://bit.ly/2wYEKEB.

And the generally expected lengthy dissent emerged too, authored by Justice Ruth Bader Ginsburg, who was joined by Justices Stephen G. Breyer, Sonia Sotomayor, and Elena Kagan.

“The Court today subordinates employee protective labor legislation to the [Federal] Arbitration Act,” notes Ginsburg at the dissent’s outset. “In so doing, the Court forgets the labor market imbalance that gave rise to the [Norris-LaGuardia Act] and the [National Labor Relations Act], and ignores the destructive consequences of diminishing the right of employees ‘to band together in confronting an employer.’ NLRB v. City Disposal Systems Inc., 465 U. S. 822, 835 (1984).”

The dissenters immediately asked for an intervention: “Congressional correction of the Court’s elevation of the FAA over workers’ rights to act in concert is urgently in order,” Ginsburg writes.

Ginsburg outlined her attack on the majority’s view in two intertwined points:  an analysis of “the extreme imbalance once prevalent in our Nation’s workplaces, and Congress’ aim in the NLGA and the NLRA to place employers and employees on a more equal footing,” as well as a counter-analysis of the FAA’s reach, which “does not shrink the NLRA’s protective sphere.”

Tracing the history of the nation’s labor movement, Ginsburg notes that actions enforcing “workplace rights collectively fit comfortably under the umbrella ‘concerted activities for the purpose of . . . mutual aid or protection.’ 29 U.S.C. § 157”—the NLRA’s Sec. 7, at the heart of the consolidated cases decided by the Court.

She notes that the Court’s view that the NLRA doesn’t protect class litigation is counter to the statute’s “text, history, purposes, and longstanding construction.”

The core dissent argument over Sec. 7 is the activity it enumerates.  Gorsuch, writing for the majority, describes a “regulatory regime” for the law that offers “specific guidance” for protective activities.  Ginsburg attacks the majority’s view that the NLRA doesn’t discuss employees’ collective litigation, about which Gorsuch noted that “it is hard to fathom why Congress would take such care to regulate all the other matters mentioned in [§7] yet remain mute about this matter alone—unless, of course, [§7] doesn’t speak to class and collective action procedures in the first place.”

But the dissent counters that NLRA Sec. 7 only discussed collective bargaining representatives’ selection with specificity. Ginsburg notes that the section didn’t offer “specific guidance” about forming labor organizations, the right to strike, or “other concerted activities” as provided in the law.

Later specific guidance on “some of the activities protected” under the law doesn’t “shed[] any light on Congress’s initial conception” of Sec. 7’s scope, which protects “numerous activities for which the [NLRA provides no ‘specific’ regulatory guidance.”

The dissent blasts the Court’s view that the employees should realize that with class action rules they use also provide inherent limits—that they can be contracted away in favor of individualized arbitration.

“The freedom to depart asserted by the Court,” writes Ginsburg, “is entirely one sided.” She concludes the section noting that NLRA Sec. 7 rights include the right to pursue collective litigation, and therefore “employer-dictated collective-litigation stoppers, i.e., ‘waivers,’ are unlawful.”

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Similarly, Ginsburg analyzes the FAA’s history to conclude that it should not override NLRA protections she and her colleagues say are present in the labor statute. “In recent decades,” the dissent says, “this Court has veered away from Congress’ intent simply to afford merchants a speedy and economical means of resolving commercial disputes.”

Specifically, the dissent cites Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20, 23 (1991)—which provided that the FAA authorized arbitration of Age Discrimination in Employment Act claims as long as the remedies available in courts were also available in arbitration—and Circuit City Stores Inc. v. Adams, 532 U. S. 105, 109 (2001), which opened FAA application up to a wide range of employment contracts containing arbitration clauses.

“Few employers imposed arbitration agreements on their employees in the early 1990’s,” Ginsburg writes. “After Gilmer and Circuit City, however, employers’ exaction of arbitration clauses in employment contracts grew steadily. “

The dissent calls that application “exorbitant,” and said it pushed the National Labor Relations Board to confront the issue in In re Horton, 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012)(PDF download link at http://1.usa.gov/1IMkHn8).

“As I see it,” Ginsburg writes, “in relatively recent years, the Court’s [FAA] decisions have taken many wrong turns. Yet, even accepting the Court’s decisions as they are, nothing compels the destructive result the Court reaches today.”

She continues her FAA analysis by noting that the NLRA prohibition doesn’t discriminate against arbitration in violation of the arbitration law. “That statute neither discriminates against arbitration on its face, nor by covert operation,” notes the dissent, adding, “It requires invalidation of all employer-imposed contractual provisions prospectively waiving employees’ §7 rights.” [Emphasis in the opinion.]

The dissent concluded with a plea on behalf of U.S. workers, who Ginsburg writes will be subject to under-enforcement of federal and state statutes. “In stark contrast to today’s decision,” she writes, “the Court has repeatedly recognized the centrality of group action to the effective enforcement of antidiscrimination statutes.” The dissent passage cites a 2015 Consumer Financial Protection Bureau study that pre-dispute agreements cut off consumers’ claims; the study was used to outlaw mandatory consumer arbitration in financial services contracts, but was overturned by the Senate under the Congressional Review Act when Vice President Mike Pence cast the deciding vote to kill the regulation last October.

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Justice Gorsuch countered the dissent arguments as vehemently as Ginsburg’s dissent took on the majority decision.

“In its view,” writes Gorsuch at the beginning of a section addressing the minority dissent, “today’s decision ushers us back to the Lochner era when this Court regularly overrode legislative policy judgments. The dissent even suggests we have resurrected the long-dead “yellow dog” contract. [Such contracts prohibited unionization; citation to Ginsburg’s opinion omitted.] But like most apocalyptic warnings, this one proves a false alarm.”

First, Gorsuch says that the decision doesn’t override Congressional policy. Workers’ rights to unionize and bargain collectively “stand every bit as strong today as they did yesterday,” the majority opinion states.

“[T]oday’s decision merely declines to read into the NLRA a novel right to class action procedures that the [NLRB’s] own general counsel disclaimed as recently as 2010,” the opinion says.

The minority’s problem, according to Gorsuch, is that it doesn’t like the Court’s FAA jurisprudence:

Shortly after invoking the specter of Lochner, it turns around and criticizes the Court for trying too hard to abide the Arbitration Act’s “‘liberal federal policy favoring arbitration agreements,’” Howsam v. Dean Witter Reynolds Inc., 537 U. S. 79, 83 (2002), saying we “‘ski’” too far down the “‘slippery slope’” of this Court’s arbitration precedent.  . . . [Internal citation omitted.] But the dissent’s real complaint lies with the mountain of precedent itself. The dissent spends page after page relitigating our [FAA] precedents, rehashing arguments this Court has heard and rejected many times in many cases that no party has asked us to revisit.

Similarly, Gorsuch and the majority also hammer the Ginsburg-minority NLRA view. “The dissent imposes a vast construction on Section 7’s language,” the opinion notes, “But a statute’s meaning does not always ‘turn solely’ on the broadest imaginable “definitions of its component words.” Yates v. United States, 574 U. S. ___, ___ (2015) (plurality opinion) (slip op., at 7). Linguistic and statutory context also matter. We have offered an extensive explanation why those clues support our reading today. By contrast, the dissent rests its interpretation on legislative history.  . . . But legislative history is not the law.” [Internal citations omitted.]

Gorsuch writes that the Court’s decision wasn’t between the laws the justices preferred but on the precise issue:

[T]he question before us is whether courts must enforce particular arbitration agreements according to their terms. And it’s the [FAA] that speaks directly to the enforceability of arbitration agreements, while the NLRA doesn’t mention arbitration at all. So if forced to choose between the two, we might well say the Arbitration Act offers the more on-point instruction. Of course, there is no need to make that call because, as our precedents demand, we have sought and found a persuasive interpretation that gives effect to all of Congress’s work.  . . .

Finally, the majority rejects the dissent policy arguments, noting that that the “respective merits of class actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches where those questions remain hotly contested.”

Gorsuch then, immediately, notes that the Senate’s repeal of the CFPB’s move to ban mandatory arbitration.

 

Russ Bleemer is the editor of CPR’s award-winning publication, Alternatives