Class Action Waivers: Two More Fifth Circuit Opinions Favor Waivers Over NLRB Challenges
In early August, the United States Court of Appeals for the Fifth Circuit issued two decisions regarding class and collective action waivers. Like its earlier decisions in D.R. Horton, Inc. and Murphy Oil USA, Inc., both decisions supported employers’ use of waivers to eliminate group lawsuits against them in employment cases. The two new cases, Convergys Corp. v. NLRB and Logisticare Solutions, Inc. v. NLRB, were both heard by the Fifth Circuit after the National Labor Relations Board (“NLRB” or “Board”) found each employer had violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by requiring applicants and employees to sign stand-alone class and collective action waivers. (As a reminder, Section 8(a)(1) of the NLRA prohibits employers from interfering with employees’ rights under Section 7 of the NLRA. Section 7 protects employees’ rights to act collectively to improve the terms and conditions of their employment, which includes a broad category of “other concerted activity.”)
As we have reported to you here, here, and here, several Circuit Courts—in addition to the Fifth Circuit—have considered whether class and collective action waivers violate the NLRA, as the NLRB repeatedly has held in its own administrative decisions. What has resulted is a split in authority among the federal courts of appeals on the issue. The United States Supreme Court is scheduled to resolve that split by hearing three of these cases as a consolidated matter in October 2017. One of the original decisions leading to the split was D.R. Horton, Inc. v. NLRB, which was a Fifth Circuit decision. In D.R. Horton, the Fifth Circuit determined that class waivers did not violate Section 7 the NLRA.Back to Convergys and Logisticare. Despite the Fifth Circuit’s precedent holding to the contrary in earlier cases, the NLRB determined in both cases that the class waivers in those cases violated the NLRA because the right to participate in a class or collective action is “other concerted activity” explicitly protected by Section 7. The Board arrived at this decision by distinguishing D.R. Horton as a case in which the class waivers were part of an arbitration agreement, putting the waivers under the protection of the Federal Arbitration Act. The stand-alone class waivers in Convergys and Logisticare, the NLRB argued, should be treated differently.
However, the Fifth Circuit vehemently disagreed with the Board’s take on D.R. Horton. In Convergys, which the Court heard before Logisticare, the panel reiterated that the Fifth Circuit precedent set by D.R. Horton is that the NLRA does not protect the right to engage in class or collective lawsuits because participating in a class action is not a substantive right, but instead is a “procedure” that can be waived. The Convergys panel said this is true whether such a waiver is part of an arbitration agreement or a stand-alone agreement. The opinion pointedly stated, “The NLRB has persistently clung to its view that Section 7 guarantees a substantive right to class and collective actions, and we have persistently declined to enforce Board orders based on this disregard for our law.”
Having first decided Convergys, the Fifth Circuit doubled down (or perhaps properly stated, at least tripled down) on its position in Logisticare, citing both Convergysand D.R. Horton in finding that Logisticare’s stand-alone class and collective action waiver did not violate the NLRA because class actions are not a substantive right under Section 7. In Logisticare, however, the Board also had gone one step further and argued that the class and collective action waiver in that case also violated Section 8(a)(1) because it was ambiguously worded such that employees might read it to prohibit filing an unfair labor charge with the NLRB, an action that is unquestionably protected by Section 7. This Board finding relied again upon D.R. Horton and also Murphy Oil USA (another Fifth Circuit decision, and one of the consolidated cases to be heard by the Supreme Court this Fall) in which class and collective action waivers stated employees were broadly waiving things like “any claims” or “any disputes” in “any forum” (Murphy Oil) and referred to “agency actions” and “lawsuits or other civil proceedings” (D.R. Horton), which the Fifth Circuit determined could reasonably be interpreted to include a charge with the NLRB. In contrast, however, the Fifth Circuit said the Logisticare waiver was specific – the waiver only included “lawsuits” and referred to “trial lawyers” and “trial by jury.” This language, the Court found, could not reasonably be interpreted to include filing an unfair labor practice charge with the Board.
Notably in both Convergys and Logisticare, the majority decision was delivered over dissenting opinions that expressed disagreement with the Circuit’s precedent that class and collective actions are not protected by Section 7, but nonetheless noted the panel’s obligation to follow existing Circuit law absent an overruling opinion by legislative action, en banc consideration by the Circuit, or a Supreme Court decision. Decisions like these continue to tee up the tension between employers and the NLRB over class and collective action waivers, making the much-anticipated Supreme Court decision even more critical. We will keep you apprised as this issue develops, including what the potential decisions by the Supreme Court will mean for employers going forward.