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The Power of Parties to Contract to Be Treated as Individuals Through Class Action Waivers in Employment Agreements

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The United States Department of Justice (“DOJ”) has previously opined that arbitration clauses waiving class actions are unenforceable. However, as of June 16, 2017, the DOJ opines that they are enforceable. The DOJ’s brief can be found here. The case to watch is Epic Systems Corp v. Lewis (consolidated with NLRB v. Murphy Oil and Ernst & Young v. Morris).  

More specifically, the DOJ’s current position is that arbitration agreements that bar individual employees from pursuing work-related claims on a collective or class basis do NOT limit the employees’ right under the National Labor Relations Act (“NLRA”) to engage in “concerted activities” in pursuit of their “mutual aid or protection” and that such agreements are enforceable under the Federal Arbitration Act (“FAA”). According to the DOJ, at this time, when parties agree to arbitrate employment-related claims bilaterally, the FAA requires enforcement of those agreements. The DOJ argues that the NLRA does not preclude enforcement of an agreement to arbitrate employees’ work-related claims bilaterally because: (1) bilateral arbitration agreements should be enforced absent a specific congressional command to the contrary and (2) the NLRA does not contain a specific congressional command precluding enforcement of plaintiffs’ bilateral arbitration agreements. According to the DOJ, enforcing the parties’ arbitration agreements in these cases, in accordance with the FAA, would not deprive plaintiffs of any substantive right conferred by another federal statute. Furthermore, the DOJ opines that the FAA’s saving clause provides no sound basis for declining to enforce the parties’ arbitration agreements.

This DOJ’s about face has occurred in the life of a single case, which is now pending before the Supreme Court of the United States (“SCOTUS”). Indeed, the DOJ previously advocated on behalf of the National Labor Relations Board, which is said to be “an independent federal agency that protects employers and employees from unfair labor practices, and protects the right of private sector employees to join together, with or without a union, to improve wages, benefits and working conditions”. In doing so, the DOJ urged SCOTUS to review and overturn a ruling (leading to the instant case). But the DOJ now argues that the same decision should be affirmed. But wait, there is more. The DOJ has authorized the NLRB to proceed itself. Thus, the DOJ and the NLRB could be arguing at odds with each other–perhaps orally as well as in writing. That would be too much fun.

But then again, the NLRB is in flux; and the case pending before SCOTUS is now set to be heard (in a one-hour oral argument) in October 2017. Indeed, on April 27, 2017, President Trump named Philip A. Miscimarra Chairman of the NLRB. Previous NLRB Chairman, Mark Gaston, remains on the Board (with a term expiring on August 27, 2018). Another NLRB member, Lauren McFerran, has a term expiring on December 16, 2019. Just this week, on June 20, 2017, President Trump selected Marvin Kaplan for the NLRB. This leaves one seat vacant. Most expect that the seat will be filled soon (perhaps with William Emanuel). Many (if not most) would have, last week, called the NLRB balance to be “pro-union”. But many (if not most) would now likely call the balance . . . balanced . . . and the likely balance to shift to “pro-management” once selections are complete and confirmed. Thus, the NLRB’s role and perhaps even its position in the matter pending before SCOTUS could shift, which will be interesting to watch.

Special Delaware note: Mr. Kaplan has served as counsel at the Occupational Safety and Health Review Commission (“OSHRC”). Delaware attorney James Sullivan was recently nominated by President Trump to serve as one of the three members of OSHRC. Congratulations, Jim! 

Some might opine that the about-face by the DOJ is inappropriate, etc. But others might opine that the about face simply supports the proposition that intelligent minds can disagree about the application of the law. Some might even argue that a true friend of a court (which is the posture when a party files an amicus brief, as did the DOJ) should be candid with the court even about a change of position. In the case pending before SCOTUS, there is a split between circuit courts. That means some very smart people took different positions on this issue. If there is room for smart people to disagree, why shouldn’t the DOJ remain free to change its mind and even argue both sides? Let us not forget that we have three branches of government. It is the job of the Executive (and its departments) to enforce laws. It is the job of the Judiciary to interpret them.

Here, the stage is set to watch our form of government at work. God bless America!

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