Today is Halloween, an occasion when our thoughts turn to jack o’lanterns, ghosts, and zombies. We are particularly fascinated by zombies—the dead returned to life. But we’re not the only ones. In a decision earlier this week, a majority of the National Labor Relations Board voted to reanimate the dead.
The Board’s zombie of choice? Its decision nearly three years ago in D.R. Horton (pdf), in which the Board sought to push back on arbitration agreements that require individual arbitration rather than class or collective actions. As our readers know by now, most courts have accepted the Supreme Court’s clear and emphatic message that the Federal Arbitration Act protects the right of contracting parties to agree to resolve any disputes through arbitration on an individual basis. But the NLRB, which hears complaints alleging unfair labor practices, came to a different conclusion in D.R. Horton, concluding that individual arbitration interferes with the right of employees to engage in “concerted activities” under Section 7 of the National Labor Relations Act— and that its interpretation of the NLRA trumps the FAA. Yet, for reasons we—along with many other critics—have discussed, that approach gets it exactly backward. The Supreme Court has held that the FAA takes precedence in the absence of a contrary congressional command. Nothing in the NLRA itself (as opposed to the Board’s own policy views) evinces a clear congressional command to override the FAA. And the Board itself cannot override a congressional enactment like the FAA.
For these reasons, the Board’s D.R. Horton ruling has been rejected by almost every court to consider it: by the Fifth Circuit (on direct review), by the Second Circuit, by the Eighth Circuit, by more than a dozen federal district courts, and— most recently— by the California Supreme Court.
But the Board, rather than acquiescing in the face of this avalanche of judicial authority, has sought to resurrect it. Earlier this week, by a 3–2 vote, the Board issued its decision in Murphy Oil USA (pdf), reaffirming D.R. Horton and rejecting the views of the courts. The Board dismissed most of the contrary authority in cavalier fashion—disparaging the Second and Eighth Circuit’s decisions for their “abbreviated” analysis, and refusing to engage with the California Supreme Court’s decision or any federal district court decision because those courts don’t typically exercise direct review over Board decisions.
As for the Fifth Circuit’s decision, the Board complained that the court gave “too little weight to [Board] policy” and that “[t]he costs to Federal labor policy imposed by the Fifth Circuit’s decision would be very high.” But this assessment simply underscores the error in the Board’s ways: An agency’s general policy views, no matter how strongly felt, cannot override the powerful congressional mandate favoring the enforcement of arbitration agreements that is embodied in the FAA. And even though the Board has authority to set policy under the NLRA, the Board’s view of what the FAA requires is not entitled to any weight at all, because Congress has never given the agency authority to interpret or administer that statute.
In response to the Fifth Circuit’s legal analysis, the Board did little more in Murphy Oil than repeat its view— resting on nothing more than the Board’s say so in D.R. Horton— that the right to engage in “concerted activities” under Section 7 includes an unwaivable substantive right to class-action procedures. But nothing in the text of the NLRA commands or even suggests that result. Although the Board purported to find an “inherent conflict” between the NLRA and the FAA, the purported conflict in fact arises only from the Board’s questionable interpretation of the NLRA, not from anything inherent in the statute itself. At bottom, the Board’s position rests on its own view of federal labor policy, not any congressional command, and an agency’s views cannot override what Congress enacted in the FAA. (Moreover, as the Fifth Circuit pointed out, the agency’s insistence that the purported right to class-action procedures is a nonwaivable substantive right under the NLRA is questionable even on its own terms.)
The Board’s decision will not be the last word on this matter. As in D.R. Horton, this latest decision is subject to direct review by a federal court of appeals, which will be free to reject the Board’s position and deny enforcement of its order. Given the weight of judicial authority rejecting D.R. Horton and the Board’s failure to respond to that authority in a convincing manner, the Board’s position will likely continue to be met with skepticism in the courts. For now, however, employers that use arbitration agreements with their employees may face possible challenges from the Board or from employees seeking to pursue class or collective actions. In short, the D.R. Horton zombie will continue to stalk the land for the immediate future.
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