I traveled to Washington today to attend the Supreme Court’s argument in the consolidated cases of Epic Systems Corp. v. Lewis (No. 16-285), Ernst & Young LLP v. Morris (No. 16-300), and NLRB V. Murphy Oil USA (No. 16-307). A tsunami of lawyers descended on the Courthouse. So many, in fact, that myself and other employment law geeks were relegated to the Lawyers Lounge, where the live argument was piped in. Nevertheless, a good time was had by all, as we burned a “vacation day” watching lawyers and judges debate whether class waivers in employment arbitration agreements are unenforceable under the FAA’s savings clause due to the NLRA provision allowing workers to engage in concerted activity.
Here are my observations:
First, the four “liberal” judges (Ginsberg, Breyer, Kagan, and Sotomayor) asked way more questions than the others. A few of these questions concerned the notion that, in real-life, these agreements do not manifest a bargain between parties with equal bargaining power. Justice Ginsberg, for example, asserted that the FAA was enacted to deal with commercial contracts and viewed employment arbitration agreements as the types of “yellow dog” contracts that the Norris-Laguardia Act was intended to outlaw. A couple of other Justices used the word “commercial” in describing the types of agreements contemplated by the FAA.
Second, there was very little discussion of Concepcion or United Colors. I found this surprising. When these precedents did come up, Justice Kagan tried to emphasize that Concepcion addressed state law limitations on arbitration, whereas today’s cases concern an alleged conflict with federal NLRA rights.
Third, it seemed like Justices Breyer and Kennedy wanted to detach the argument from “class actions.” Both posed questions based on hypotheticals in which 2 or 3 employees seek to pursue their rights together in court, arbitration, or some other forum. Breyer suggested that such analysis enabled the Court to focus on the interplay between the NLRA and the FAA’s savings clause without getting “bogged down” in Conception and class actions. The employers seemed to concede that the applicable waiver language would prohibit even small groups of 3-4 workers from banding together. However, the employers argued that these small groups could still achieve some economies of scale by, for example, retaining the same lawyer. This argument did not seem too satisfactory.
Fourth, some of the most interesting questions surrounded the NLRB’s assertion that the NLRA only prohibits employers from restricting concerted action. Thus, according to the NLRB, an arbitration provision would not be illegal if it (i) mandates arbitration without explicitly banning collective litigation but (ii) the selected arbitral forum (e.g AAA or JAMS) enacts rules that make it really difficult for workers to proceed collectively. That’s because, under these circumstances, the restrictions on arbitration are implemented by the arbitral forum; not the employer. Put differently: the NLRA merely gives workers the right to attempt to proceed collectively under the procedural rules of the forum where the dispute winds up. This concept seemed to be especially important to the Justices Breyer and Kennedy. For example, Justice Kennedy asked if there’s anything wrong with compelling a worker to an arbitral forum that had a bright-line rule that disputes involving fewer than 51 employees could not go forward collectively. Breyer weighed in that such requirements are similar to Rule 23 in the judicial context.
My Takeaway: In my humble opinion, Justice Breyer was the “star” of the argument. His questions and observations seemed to reveal an attempt to carve out a narrow rationale that Justice Kennedy can join. I think such a strategy entails (1) not getting bogged down in Concepcion or the “class action” device and (2) acknowledging that the pertinent arbitral forum might have procedural requirements that make class litigation difficult (but not impossible) to obtain. The goal, it seems to me, is to draft an opinion holding that arbitration clauses cannot contain waivers that strip workers of the opportunity to attempt to pursue collective litigation in some forum (judicial, arbitral, or administrative) under the forum’s particular procedural guidelines.