Tuesday, March 19, 2013

Sullivan & Glynn on D.R. Horton

Sullivan GlynnCharlie Sullivan & Tim Glynn (both Seton Hall) have just posted on SSRN their article (forthcoming 64 Alabama L. Rev. (2013)) Horton Hatches the Egg:  Concerted Action Includes Concerted Dispute Resolution.  Here's the abstract:

As interpreted by the Supreme Court, the Federal Arbitration Act has largely swept all before it, validating agreements to arbitrate almost all disputes, including those involving claims under statutes regulating the employment relation. That era may be nearing an end. The National Labor Relations Board recently held in In re D.R. Horton 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. Unsurprisingly, this decision has generated an enormous amount of litigation. Although the case itself is pending before the Fifth Circuit, courts across the country are now confronting Horton-based challenges to the enforcement of mandatory arbitration clauses in employment contracts. To date, they have generally rejected these challenges on various grounds.

This Article will explore why these courts are wrong and why agreements that bar concerted dispute resolution are indeed invalid. The Board’s articulation of labor law rights ordinarily is entitled to judicial deference. But such deference has been called into question in Horton itself in part because of a recent circuit court decision invalidating recess appointments to the Board. As we will demonstrate, however, no deference is necessary because Horton reflects the correctnot merely a reasonableinterpretation of the NLRA as well as its predecessor, the Norris-LaGuardia Act.

Moreover, although the Supreme Court has seemingly treated the Federal Arbitration Act as a “super-statute” that overwhelms all before it, the Court has simultaneously denied doing more than applying what textual analysis and interpretive conventions require. The Horton question will force the Court to confront the collision between what it says and what it does. Established doctrines of statutory interpretation, recently and resoundingly reaffirmed by the Court, dictate a contrary result. Indeed, to the extent the concerted activity mandate of federal labor law conflicts with provisions of the FAA, the former clearly supersedes the latter.

With apologies to Dr. Seuss, Horton meant what it said and said what it meant. Courts must follow, one hundred percent.

For what it's worth, I agree completely with Charlie and Tim about what the Court should do, but I do not expect that this is what the Court will do.  As I have argued elsewhere, the Court is, in FAA cases, all too willing to subsume plain language to the Court's policy preference for arbitration.  I suspect that the Court will do as it did in Concepcion, and find that the D.R. Horton rule would have the effect of discouraging employers from promulgating individual employment arbitration agreements and therefore is inconsistent with the FAA. 

One might argue that Concepcion is distinguishable because it involved a potential conflict between the FAA and a state common-law doctrine (unconscionability) instead of a federal statute (NLRA).  But I wouldn't read too much into this given the express language in the FAA Section 2 preserving state common-law defenses to arbitration agreements.  If the Court in Concepcion was willing to erase that language, I see no reason why the Court will give the language of the NLRA any higher priority.



Arbitration, Labor Law, Scholarship | Permalink

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