The Right to Concerted Legal Redress

Many thanks to my colleague Rick for his post on the abstract for Horton Hatches the Egg: Concerted Action Includes Concerted Dispute Resolution, which Tim Glynn and I recently uploaded on SSRN.  We don't disagree with him that the smart money might well bet on the FAA in this collision, but we're pretty sure this will be a heavier lift for a textualist Court than at least some of the prior decisions.

In any event, while we (naturally) think the piece is worth a read in full, in the interests of shameless self-promotion and on the remote possibility that some of you might want a short summary, here goes.

A little over a year ago, the National Labor Relations Board decided In re D.R. Horton, which held that employers may not compel employees to waive their NLRA right to pursue collective legal redress of employment claims. Instead, the NLRA mandates that some mechanism for concerted dispute resolution remain available in arbitral or judicial forums.  The decision was appealed to the Fifth Circuit, where it remains pending after oral argument.  That court has to face not only the underlying substantive issue but also various challenges to the composition of the Board itself.  A successful challenge would vacate Horton and threaten a number of other Board decisions (and, indeed, perhaps the decisions of a number of other agencies to the extent that the Fifth Circuit might fall into line with the D.C. Circuit in Noel Canning v. NLRB, invalidating most recess appointments).

Our article, however, mostly avoids the quorum issues since the question the Board decided – whether an arbitration agreement can bar all joint and collective resort to legal remedies in any forum, arbitral or judicial – will confront courts whenever an employer moves to stay a lawsuit pending arbitration. And in such proceedings the Horton analysis will continue to have influence, regardless of whether the Board decision is affirmed or vacated. In fact, in our view, the courts are required to address this analysis, not because of (or at least not only because of) Horton itself, but because it reflects the correct interpretation of the NLRA as well as its predecessor, the Norris-LaGuardia Act.

Indeed, we think the threshold question – whether the labor laws protect the right to concerted action in the form of concerted dispute resolution – is scarcely debatable. While we track through the case law establishing that principle, tracing it back to the Norris-LaGuardia Act’s invalidation of yellow dog contracts, the bottom line is that it’s hard to imagine a reading of that statute and the NLRA that would protect employees from contracting away their right to strike and picket but nevertheless allow them to agree not to join together as co-plaintiffs or in class or collective actions to vindicate their rights in appropriate forums. Of course, if you have doubts or your curiosity is piqued, you can go check out the article!

The real stumbling block for Horton is not the clear requirements of labor law but, as Rick suggests, the Federal Arbitration Act. Now, we agree with Rick that the FAA has, at least until now, been king of the hill when it comes to its intersection with other federal statutes. That has been due to the Supreme Court’s rather impressive ability to interpret the FAA not to conflict with the other statutes and thus avoid having to confront the correct result should it find an irreconcilable conflict. But we believe even the present Court would have to recognize that, in the Horton scenario, the irresistible force of the FAA has met the immovable object of the labor law right to concerted dispute resolution.

Ironically, it is the Supreme Court’s recent decisions regarding arbitration that have made the conflict inevitable. In its most recent FAA jurisprudence, the Court has gone well beyond insisting that arbitration clauses be enforced on the same terms as other contractual provisions.  In Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1775-76 (2010) and AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1750 (2011), the Court stated that the enforcement of arbitration clauses as written means, absent qualifying language, that arbitration must be bilateral, that is, only between the parties to the agreement. Taken together, these decisions indicate that an (unqualified) mandatory arbitration clause in an otherwise enforceable contract will preclude joint, collective, or class enforcement in both arbitral and judicial forums and therefore abridge employee rights to concerted action.

Thus, there is a conflict between the two regimes, and the Court will have to decide which trumps where an otherwise valid arbitration agreement purports to limit what would be employees’ right to concerted dispute resolution or other concerted activity. For us, the answer is easy: applying normal principles of statutory interpretation, the labor statutes (the NLA and the NLRA) effects a pro tanto repeal of the FAA. Indeed, as an obvious starting point, both regimes expressly so provide!  Thus, the FAA finds arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” And the Norris LaGuardia Act contains an express repealer: “All acts and parts of acts in conflict with the provisions of this chapter are repealed.”  29 U.S.C. §115.

Moreover, we believe that, by fair implication, the NLRA also repeals conflicting applications of the FAA.  A simple hypothetical, drawing on the plain language of the FAA, makes the point pellucid. While we usually think of the FAA as governing disputes about legal rights, § 2 it is framed much more broadly to validate any “agreement in writing to submit to arbitration an existing controversy.” What would this section say about the scenario in NLRB v. Washington Aluminum Co.,  370 U.S. 9 (1962), the seminal NLRA concerted action case? In the case itself, the Supreme Court affirmed the Board’s finding that seven workers who had left work together to protest the shop’s bitterly cold but not unlawful conditions had engaged in protected concerted activity under Section 7. If the FAA’s broad bilateral arbitration enforcement mandate survives the NLRA in this context, an employer could require that all employees to agree, as a condition of employment, to submit Washington Aluminum-like complaints or disputes—all “controversies over conditions in the shop”—exclusively to individualized, binding arbitration.

Needless to say, so reading the FAA would effectively repeal the labor law.  The bottom line then has to be otherwise:  the labor statutes trump the conflicting FAA.  Obviously, the full analysis with all of its twists and turns requires a deeper dive than this, so I again shamelessly invite you to read the piece. . . .

Finally, I should note that reaching this result required dealing with some pesky issues which you can pursue if you’re so inclined. For example, there’s an argument (that we don’t think much of) that courts have to leave these questions, at least in the first instance, to the primary jurisdiction of the NLRB. And there’s an argument that Glynn and I view as bizarre (but has been accepted by some courts) that the FAA in fact trumps the labor laws. It goes this way: while the FAA was enacted in 1925 and the NLA and NLRA in the ‘30s, the FAA was reenacted in 1947 as part of a routine codification of the United States Code and it is therefore the later in time and trumps the “earlier” statutes in the event of conflict. Really.

I’ll come back to some of the implications of our analysis in a follow-up post.  And it will be shorter.  Really. 

CAS