Proposed Federal Legislation Quietly Threatens Viability of Class and Collective Action Waivers Through New House Spending Bill
On September 8, 2021, the House Education and Labor Committee issued proposed legislation in connection with the House’s new spending bill. Among other pro-union proposals issued in connection with the Protecting the Right to Organize (PRO) Act, the proposed legislation seeks to amend the National Labor Relations Act (NLRA) by banning class and collective action waivers.
The proposed legislation, which can be found here, says that no employer shall “enter into or attempt to enforce” any express or implied agreement not to “pursue, bring, join, litigate, or support any joint, class, or collective claim” arising from the employment relationship. This is unwelcome news to employers who rely on class and collective action waivers in their arbitration agreements.
Supreme Court Precedent
Given the coercive nature of class and collective action lawsuits (regardless of their merits), waivers in arbitration agreements are valuable risk mitigation tools. Waivers are particularly useful in defending against claims arising under the Federal Labor Standards Act (FLSA) and other federal laws, as some state laws are insulated against waiver.
On both state and federal levels, class and collective action waivers are also popular targets for legal challenges. Prior to May 2018, the National Labor Relations Board (NLRB) and many federal courts—including the Second, Fifth, Sixth, Seventh, Eighth, and Ninth Circuits—issued conflicting opinions regarding whether class and collective action waivers ran afoul of the NLRA. In order to resolve the circuit split, the Supreme Court granted certiorari and consolidated three cases: Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1151 (7th Cir. 2016) (holding that the NLRA rendered class and collective action waivers unenforceable in employment arbitration agreements); Morris v. Ernst & Young, LLP, 834 F.3d 975, 983 (9th Cir 2016) (same); and Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013, 1016 (5th Cir. 2015) (upholding class and collective action waivers in employment agreements under the NLRA).
We previously blogged about the consolidated case, Epic Sys. Corp. v. Lewis, 138 S Ct 1612 (2018)(“Epic Systems”), in which the Supreme Court sided 5-4 with the Fifth Circuit and GC Memorandum 10-06 (written by Ronald Meisburg, Special Counsel at Hunton Andrews Kurth LLP, when he was serving as General Counsel to the NLRB). In so ruling, the Supreme Court secured the viability of class and collective action waivers under the as-written text of the NLRA.
Challenges Following Epic Systems
Following Epic Systems, pro-union advocates wasted little time in forming renewed challenges to class and collective action waivers. This time, the focus was on amending the NLRA. Several of our prior blog posts cover these challenges in depth.
Most notably for purposes of the current spending bill, House Democrats sought as early as October 2018 to nullify Epic Systems by making it an unfair labor practice to require employees to sign mandatory arbitration agreements, whether individual or collective in nature, through the Restoring Justice for Workers Act.
As we predicted at the time, the 2018 Restoring Justice for Workers Act did not go into effect, instead dying in session before getting to the Senate floor. However, with the Senate and the presidency currently under Democratic control, the proposed NLRA amendments in the spending bill may stand a better chance at enactment. The same is true for a new version of the Restoring Justice for Worker’s Act, reintroduced in July.
If the proposed language remains in the spending bill, the budget reconciliation passes the Senate, and President Biden signs it into law, it could go into effect as early as January 1, 2022.