Friday, May 04, 2012

NLRB On A Collision Course

Do non-union employees have a right under the National Labor Relations Act [NLRA] to join in a class-action to secure their rights as employees?

 The interesting dilemma arises from the National Labor Relations Act’s protection of employees to engage in collective or “concerted” action to secure their employment rights. The dilemma arises because a class action is also a form of concerted action. A couple of recent National Labor Relations Board [NLRB] decisions highlight the political tension between the conservative majority of the Supreme Court and the Obama appointed members of the National Labor Relations Board. [NLRB.] This battle in my mind casts a shadow over the “equal” branches of government, putting in doubt the executive’s respect for the judiciary. 

 Our own California Supreme Court ran headlong into the conservative brick wall of the U.S. Supreme Court in Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, which was remanded by the U. S. Supreme Court on appeal (late 2011), with directions that the California Supreme Court should reconsider its 4 to 3 decision to invalidate the employment arbitration agreement.  The U.S. Supreme Court has held that consumers can be compelled to waive their class-action rights and to arbitrate their individual claims.  AT&T Mobility LLC v Concepcion  [“Concepcion”]  

 This federalism fight turns on the legal principle that a contract cannot be enforced if doing so would be in violation of federal law. Stated simply, you cannot enter an agreement to violate the law, and expect courts to enforce your contract. In a battle between federal and State law covering the same issue, the federal law pre-empts a conflicting State law.    

Of relevance to this battle is an NLRB decision currently on appeal to the Fifth Circuit Court of Appeals, known as the "Horton" case.  In Horton the NLRB concluded that an employer violated the NLRA when it obtained employee agreements to waive their class action rights to sue the employer. "Horton" I believe is likely to be reversed on appeal. 

A recent administrative complaint filed by the General Counsel for the NLRB charges that an employer promulgated contract waiving employees rights to file a class action collides with the federal rights of non-union employees to engage in concerted action. 

 This NLRB charge against "24 Hour Fitness" goes even farther than the Board's decision in Horton. The “Horton” employer did not allow the employees to opt out of the binding arbitration agreement. In contrast, the “24 Hour Fitness” employer permitted its employee's to request, complete, and deliver an "opt out" form within 30 days of signing the arbitration agreement.  Nonetheless, General Counsel for the NLRB charges that this “opt out” option does not bring the arbitration agreement within the requirements of the NLRA. 

 At first view, this "24 Hour Fitness" NLRB Complaint seems like political "flag waving" with little chance of success.  But maybe the General Counsel for the Board is on to something:   

This fight over "concerted action" is not a simple pre-emption case of the Federal Arbitration Act ["FAA"] invalidating a conflicting state statute.  This is a question of legislative intent where Congress has enacted two sets of statutes addressing the same question:  "concerted action" as defined by the NLRA and "class action" as defined by the Rules of Civil Procedure.  Both concerted action and class action are undertaken by one subclass of the general population:  employees acting within their employment.  

If the U.S. Supreme court addresses the legal issue in this framework, then I predict they will find that Congress intended the NLRA to provide the prevailing law.  Why?  Because the FAA covers class actions generally, while the NLRA covers "concerted action" by employees specifically.  The inference is that Congress intended to exempt employees engaged in class actions from the general policy favoring arbitration found in the FAA.  Of course, a logical step is also required:  that "concerted action" is inclusive of "class action."  The Supreme Court, if it wills, can make that step consistent with law.  

Finally, the NLRA is not limited to unionized employees.  It covers all employees engaged in "concerted action" to address their concerns over the terms and conditions of employment.  Thus, the seemingly Quixotic recent maneuver by the NLRB may have a few more teeth than the usual toothless tiger we see, if the case is taken up on appeal. In the meantime, I urge the Plaintiff's bar to add this argument to their assault on class-action waivers:  the waivers violate the NLRA, and the NLRA controls over the "general" provisions of the FAA to permit class actions.  

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