On May 26, 2016, in Lewis v. Epic Systems Corp., No.
15-2997, 2016 WL 3029464 (7th Cir. May 26, 2016), the Seventh Circuit, fueling
a circuit split, sided in favor of the National Labor Relations Board (“the
Board”) position in D.R. Horton, Inc., 357
NLRB No. 184 (2012), holding that employers violate Section 7 of National Labor
Relations Act (NLRA) by requiring employees covered by the Act to waive, as a
condition of their employment, participation in class or collective
actions. Under Section 7 of the NLRA, employers are prohibited from interfering
with employees’ right “to engage in…concerted activities for the purpose of
collective bargaining or other mutual aid or protection.”
In Epic
Systems, Lewis, a technical writer, filed a suit in federal court in
Wisconsin on behalf of himself and other technical writers alleging that his
employer – Epic Systems Corporation – had violated the Fair Labor Standards Act
(FLSA) by misclassifying workers as exempt and depriving them of overtime. In response, Epic-Systems moved to dismiss
Lewis’s claim and compel individual arbitration because he had signed an
arbitration agreement that waived his “right to participate in or receive money
or any other relief from any class, collective, or representative proceeding.” Lewis, however, responded that the agreement’s
class and collective action waiver was unenforceable because it interfered with
his right to engage in concerted activities under Section 7 of the NLRA. The district court agreed with Lewis’s
arguments and the Seventh Circuit affirmed.
Chief Judge Diane Wood explains in Epic Systems that “there is ‘no doubt
that illegal promises will not be enforced in cases controlled by the federal
law.’” Epic Sys. Corp., 2016 WL 3029464, at *6 (quoting Kaiser Steel Corp. v. Mullins, 455 U.S.
72, 77 (1982)). As reasoned in D.R. Horton, Section 7 grants employees
the substantive right to act “concertedly for mutual aid or protection” and
mandatory arbitration agreements that bar an employee’s ability to bring or
join class or collective workplace claims restrict this substantive
right.
D.R. Horton adversaries claim that the Board and now the
Seventh Circuit have expressly rejected the Supreme Court’s clear instructions
on how to interpret the Federal Arbitration Act (FAA), which says that absent
some specific “contrary congressional command” as to whether a claim can be
arbitrated, the FAA “requires the arbitration agreement to be enforced according
to its terms.” CompuCredit Corp. v.
Greenwood, 132 S.Ct. 665, 673 (2012). However, as Chief Judge Wood
explains in Epic Systems, “[b]efore
we rush to decide whether one statute eclipses another, we must stop to see if
the two statutes conflict at all.” Epic Sys. Corp., 2016 WL 3029464, at *5.
The U.S. Supreme Court has made clear that “when
two statutes are capable of co-existence ... it is the duty of the courts,
absent a clearly expressed congressional intention to the contrary, to regard
each as effective.” Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528,
533 (1995); see also Matsushita Elec.
Indus. Co. v. Epstein, 516 U.S. 367, 381 (1996) (implied repeal should be
found only when there is an “‘irreconcilable conflict’ between the two federal
statutes at issue”) (quoting Kremer v.
Chem. Const. Corp., 456 U.S. 461, 468 (1982)). Epic
Systems elucidates that the FAA and NLRA are reconcilable by way of the
FAA’s savings clause, which provides that if “the provision at issue is
unlawful under Section 7 of the NLRA, it is illegal, and meets the criteria of
the FAA’s savings clause for non-enforcement,” i.e., that an arbitration agreement’s conflict with federal law is
grounds for invalidation. Epic Sys., 2016 WL 3029464, at *6. When Congress drafted the FAA, it anticipated
that conflicts could arise between it and other Federal laws, and by including
the savings clause, it created a means of harmonizing the FAA with laws such as
the NLRA.
The Seventh Circuit’s decision splits with last
year’s Murphy Oil USA, Inc. v. N.L.R.B.,
808 F.3d 1013 (5th Cir. 2015), in which the Fifth Circuit held the exact
opposite, ruling that the employer did not commit unfair labor practices by
requiring employees to sign its arbitration agreement or seeking to enforce
that agreement in federal district court. The Fifth Circuit rejected the Board’s
position, but the Court did not profess to have the last word on the
matter. The Fifth Circuit wrote, “[a]n administrative agency’s need to
acquiesce to an earlier circuit court decision when deciding similar issues in
later cases will be affected by whether the new decision will be reviewed in
that same circuit…We do not celebrate the Board's failure to follow
our D.R. Horton reasoning, but neither do we condemn its
nonacquiescence.” Murphy Oil,
808 F.3d at 1018 (referencing Samuel Estreicher & Richard L. Revesz, Nonacquiescence by Federal Administrative
Agencies, 98 YALE L.J. 679, 735–43 (1989)).
The
circuit split on the enforceability of class action waivers has the legal
community reeling. While D.R. Horton, Epic Systems, and the present judicial climate have emboldened the plaintiffs’-side employment
law bar nationwide, the debate continues to arouse
long-held sentiments that workers’ rights should be subjugated in the name of
commerce and contractual rights. The Supreme Court will likely have to
address the conflict presented in D.R.
Horton, Murphy Oil, and Epic Systems, and people in the labor
and employment law community are on the edge waiting to hear who ends up in the seat formerly held by
Justice Antonin Scalia.
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