By Robert Gross
ALR Senior Editor, 2018-2019
In 2018, some members of Congress re-initiated the fight over employment agreements and arbitration clauses.[1] On May 21, 2018, the United States Supreme Court, in Epic System Corp. v. Lewis, 138 S. Ct 1612 (2018), sought to determine whether employment contracts should be allowed to contain class action arbitration waivers.[2] The plaintiffs challenged the applicability of the class action waivers through the interaction of the Federal Arbitration Act (“FAA”) Section two and the National Labor Relations Act (“NLRA”).[3] Under Section Two of the FAA, “the saving clause allows courts to refuse to enforce arbitration agreements ‘upon such grounds as exist at law or in equity for the revocation of any contract.’”[4] In furtherance of the purpose of the FAA, in addressing judicial hostility toward arbitration, the majority held the savings clause was of no avail to the plaintiffs because the claims did not apply to all contracts, as required by the FAA.[5] The majority also noted that when two statutes are in conflict, the Court should “strive ‘to give effect to both’” statutes.[6] The Court also noted for a statute to replace another, there must be a finding of clear intention on the part of Congress.[7] The plainiffs relied on section seven of the NLRA which specifically states “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”[8] The majority stated that there was not enough intent in the NLRA section seven in order to find a rejection of the FAA in the employment context.[9] In its reasoning the Court noted that Congress clearly knows how to override sections of the FAA and if they intended to remove the availability of class action waivers in the employment context, Congress could pass a statute to accomplish that goal.[10]
As if in response to this charge, on October 30, 2018, Representative Nadler of New York, proposed H.R. 7109 on the floor of the House of Representatives.[11] While the FAA is based on the theory of freedom of contract, the Bill states that employees often have little say in the contracts they sign and whether or not those contracts have arbitration or class action waivers.[12] The proposed statute specifically cites Lewis as going against congressional intent of the NLRA.[13] The proposed statute states that the purposes of this new legislation would be to “prohibit predispute arbitration agreements,” “prohibit retaliation,” provide protection for post dispute arbitration agreements, and finally, to amend the NLRB to prohibit the interference with employees’ rights to class actions.[14]
As noted by Justice Gorsuch, there are debatable policy questions related to restricting the FAA in the context of employment contracts but the law, as currently formulated, does not allow for those policy reasons to win the day.[15] It will certainly be interesting to see if a new Democratic House of Representatives will take this issue up in 2019 or if this proposed legislation will die in committee as
[1] See Restoring Justice for Workers Act, H.R. 7109, 115th Congress (2018).
[2] Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).
[3] Id. at 1622.
[4] Ibid. (quoting 9 U.S.C. § 2).
[5] Ibid. (Citing Kindred Nursing Centers L.P. v. Clark, 137 S. Ct. 1421 (2017)).
[6] Id. at 1624 (quoting Morton v. Mancari, 417 U.S. 535, 551 (1974)).
[7] Ibid.
[8] Ibid. (quoting 29 U.S.C. § 157).
[9] Ibid.
[10] Id. at 1626.
[11] Congress.gov, https://www.congress.gov/bill/115th-congress/house-bill/7109/all-actions-without-amendments.
[12] Restoring Justice for Workers Act, H.R. 7109, 115th Congress § 2 (2018).
[13] Restoring Justice for Workers Act, H.R. 7109, 115th Congress § 2 (2018).
[14] Restoring Justice for Workers Act, H.R. 7109, 115th Congress § 3 (2018).
[15] See Lewis, 138 S. Ct. at 1619.