On May 21, 2018, the Supreme Court issued a decision in NLRB v Murphy Oil USA. The case, which was consolidated with Epic Systems Corp v Lewis and Ernst & Young v Morris, concerned whether the National Labor Relations Act prohibited employment arbitration agreements that ban employee class actions. In a 5-4 decision, the Supreme Court decided that these arbitration agreements are permitted under the NLRA. Justice Gorsuch was joined in his opinion by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito. Justice Ginsburg dissented and was joined by Justices Breyer, Sotomayor, and Kagan.
The case was originally heard by the National Labor Relations Board in 2014. The Board concluded that employees’ right to file a class action lawsuit is “protected concerted activity” under the NLRA and, therefore, arbitration agreements with class action waivers violate employees’ NLRA Section 7 right to act collectively. On appeal, the Fifth Circuit overturned the NRLB decision finding that class action waivers in employment arbitration agreements do not violate the NLRA.
The Supreme Court agreed with the Fifth Circuit’s rebuke of the NLRB. According to Justice Gorsuch, the NLRA “focuses on the right to organize unions and bargain collectively. It does not mention class or collective action procedures or even hint at a clear and manifest wish to displace the [Federal] Arbitration Act. It is unlikely that Congress wished to confer a right to class or collective actions in Section 7, since those procedures were hardly known when the NLRA was adopted in 1935.”
The decision further concludes that “Congress has instructed in the [Federal] Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the National Labor Relations Act (NLRA) suggests otherwise.”
Given the frequency and cost of employment-related lawsuits, many businesses opt to utilize arbitration agreements. According to the Economic Policy Institute, more than half of private-sector employers have mandatory arbitration procedures, and 30 percent of these include class action waivers. The NFIB Small Legal Center filed an amicus brief before the Supreme Court, which can be found here. Oral arguments before the Supreme Court were heard on October 2, 2017.
