The U.S. Solicitor General changing positions, the NLRB issuing a follow-up letter to oral arguments and the grave observation that a ruling for employees would invalidate agreements covering 25 million employees all reflect the contentious nature of the consolidated cases before the Supreme Court challenging the ability of an employee and employer to agree to limit resolution of legal claims to individual arbitration.
The Supreme Court kicked off its 2017 fall term on October 2, hearing argument from four attorneys in Epic Systems Corp. v. Lewis. In an unusual twist, two U.S. agencies were on opposite sides of the Supreme Court that day with the Office of the Solicitor General arguing for enforcement of the arbitration agreements and the National Labor Relations Board defending its position that Section 7 prohibits employees from agreeing not to bring class actions or collective arbitration. The Solicitor General’s Office had originally urged the Court to review the cases in support of the NLRB’s position but abruptly changed tunes after the new presidential administration reviewed the case. Two additional attorneys represented the parties directly.
The Justices spent the majority of the hour grappling with where the edges of “concerted activity” lie in Section 7. Does the statute give employees this right for activity merely “in the workplace” as Paul Clement suggested for the employers? Or does the right require a possibility of joining together as a part of the same claim in a judicial or arbitral forum, as Daniel Ortiz asserted for the employees?
Chief Justice John Roberts provided a hypothetical that illustrated the question at the heart of the cases. He asked: Can an employer and employee agree to arbitrate in a hypothetical forum with a procedural rule where collective claims require a class of at least 50 people?
Richard Griffin, arguing for the NLRB, stated in argument that yes, this hypothetical is valid under Section 7. He claimed that an agreement could not contain this condition as a contractual term but that the “employee takes the rules of the forum as they find them.” Mr. Ortiz, for the employees, narrowed this position slightly by saying this rule could only be valid under Section 7 if there was an alternative available where a group of less than 50 people could pursue an action collectively. Mr. Griffin submitted a clarifying letter the day after arguments stating there was no disagreement between the NLRB’s position and that of the employees.
The Justices who participated most actively will not be the ones deciding this case. Justice Breyer showed his hand on the issue, telling Mr. Clement that “I haven’t seen a way that you can, in fact, win the case…without undermining and changing radically what has gone back to the New Deal…” In contrast, Chief Justice Roberts demonstrated his concerns when he clarified that the effectiveness of 25 million employees’ arbitration agreements are hanging on this decision. The silent Justices on October 2 – Gorsuch and Thomas – will likely offer the deciding votes on this important question for employers.
Husch Blackwell’s Labor and Employment team will keep you updated on the Supreme Court’s action on arbitration agreements and collective actions.