Symposium: The Federal Arbitration Act and the National Labor Relations Act are two ships that pass in the night
on May 21, 2018 at 10:17 pm
Although the Supreme Court’s decision today in Epic Systems Corp. v. Lewis was a close one (5-4), the result was not surprising, in light of the court’s recent decisions establishing the primacy of the Federal Arbitration Act over other, potentially conflicting federal statutes. At issue was whether the FAA’s mandate to enforce arbitration agreements according to their terms was displaced by Section 7 of the National Labor Relations Act, which grants employees “the right … to engage in other concerted activities for … mutual aid or protection.” In particular, the employment agreements in these three consolidated cases all required the employees to arbitrate their work-related disputes on an individual basis only. So the question was whether the NLRA’s protection of “other concerted activities” created a substantive right to pursue group legal action that invalidated the agreements, by displacing the FAA’s mandate to enforce class and collective action waivers in arbitration agreements.
The majority answered no. The general residual phrase “other concerted activities” did not displace the FAA and did not guarantee employees the right to pursue group legal action against their employer in court or in arbitration. Instead, this phrase guaranteed employees the right to join together in the workplace to address working conditions among themselves and with their employer. Group legal action is simply not the “strength in numbers” that Congress had in mind when it enacted the NLRA to protect employees’ freedom of association in the workplace. In essence, the court preserved the peaceful coexistence of two unrelated federal statutes that had remained undisturbed until only very recent times. While the FAA requires the enforcement of arbitration agreements according to their terms, the NLRA serves the different purpose of protecting employees’ freedom of association in the workplace.
Consistent with the Supreme Court’s recent FAA cases, the majority emphasized from the outset that the enforceability of the arbitration agreements was a question of harmonizing the FAA with the NLRA, and that the starting point was the FAA’s mandate to enforce arbitration agreements according to their terms. In particular, the court summarized its recent FAA cases, which have held that requiring the availability of collective proceedings when, as here, an arbitration agreement expressly barred such proceedings contravenes the fundamental attributes of arbitration protected by the FAA – namely, to enforce arbitration agreements according to their terms, so as to ensure streamlined, individualized proceedings. To displace the FAA’s mandate, then, it is not enough to argue that the NLRA’s phrase “other concerted activities” could be interpreted to include group legal action. Instead, to override the FAA, that phrase must require such an interpretation. And any doubts are resolved in favor of the FAA.
The NLRA’s statement of purpose, in Section 1, makes crystal clear that the statute was intended to achieve industrial peace by promoting group negotiation and compromise in the workplace. This has nothing to do with group litigation in court or in arbitration. In particular, Section 1 of the NLRA announces Congress’ intent to create equality of bargaining power in the workplace between labor and management, by protecting the right to unionize, to engage in collective bargaining, and to engage in other forms of peaceful worker association to address the terms and conditions of employment.
This broad statement of employees’ rights of association in the workplace is then reduced to a detailed list of protected activities in Section 7 of the statute: “Employees shall have 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.”
As the majority explained, Section 7 of the NLRA enumerates specific protected concerted activities, followed by the catchall phrase “other concerted activities.” Under the rule of “ejusdem generis,” from the Latin phrase meaning “of the same kind,” “other concerted activities” should be defined and limited by the specific concerted activities that precede it. Those specific concerted activities identify certain ways in which employees can organize in the workplace and address working conditions with their employer. “Other concerted activities,” then, protects other, similar ways in which employees can join together in the workplace, short of forming a union or engaging in collective bargaining. Those activities would have nothing to do with group legal action. To interpret the phrase so broadly would render Section 7’s list of concerted activities superfluous, and it would also go far beyond the NRLA’s express purpose of protecting freedom of association in the workplace.
The NLRA’s historical context also makes clear that the statute had nothing to do with creating a new right of group legal action, and everything to do with protecting workers’ rights of association in the workplace. Before the NLRA’s passage, any efforts by employees to act “in concert” were treated as illegal conspiracies or combinations in restraint of trade. “Concerted activities” had become a pejorative phrase that referred to workers’ illegal efforts to organize. In a clean break with the past, the NLRA reversed the negative historical meaning of “concerted activities” from legally prohibited group conduct to legally protected group conduct. What was once a dirty word became a guaranteed right. But this had nothing to do with creating a new right of collective legal action against employers.
In its decision, the court also addressed one of its earlier NLRA cases that figured prominently in the employees’ briefs and at oral argument. In Eastex, Inc. v. NLRB, the court held that the NLRA protected the distribution of a union newsletter in the workplace that urged workers to take political action outside the workplace concerning employment issues affecting workers generally. The court explained that, although the union newsletter encouraged employees to take action outside the workplace, the distribution of the newsletter in the workplace was protected concerted activity because it was for the “mutual aid or protection” of employees under Section 7 of the NLRA. Eastex expressly declined to decide what constituted “concerted activities” outside the workplace, nor did it involve any legal action taken by employees, let alone any collective legal action. In short, Eastex did not suggest in any way that the NLRA displaced the FAA’s mandate to enforce class and collection waivers in employment arbitration agreements.
In essence, the court’s recent decisions under the FAA had already decided Epic Systems. Under those decisions, the FAA’s clear mandate to enforce arbitration agreements according to their terms can only be defeated by an equally clear and contrary congressional mandate found in another statute. But the NLRA falls far short of this standard because its clear purpose is to protect group activity in the workplace, not group legal action in court or arbitration. However, as both the majority and dissent observed in today’s opinion, the legislature has the final word on this issue. Congress, and Congress alone, is free to respond to the decision by amending either statute.