Practical implications of Murphy Oil on employee waivers: an ecological disaster or a dissenter's pipeline to freedom?

• Author: Mall, Laura L.
• Position: 2014 NLRB decision in Murphy Oil USA Inc. v. Hobson

This coming July will mark the 80th anniversary of the passage of the Wagner Act, signed into law by President Roosevelt in 1935. It was the Wagner Act that gave employees, under [section]7, the right to form and join unions and to go on strike; and under [section]8, it obligated employers to bargain with them. It was the Wagner Act that created the National Labor Relations Board (NLRB), a three-member panel appointed by the president and confirmed by the Senate, to enforce those rights and mediate disputes between them.

The chief cornerstone of the Wagner Act is the right to engage in "protected concerted activity," which, more simply stated, gave employees a legally protected right to act together to try to improve their pay and working conditions, with or without a union. A lot has changed since then. The Wagner Act is now known as the National Labor Relations Act (NLRA), (1) and the definition of what constitutes protected concerted activity encompasses within it certain communications by employees on social media like Facebook. Now, there is even an NLRB mobile iPhone and Android application available that provides employees and unions with information regarding their rights and obligations. But one thing hasn't changed: Employers, unions, and the NLRB often sharply disagree as to the limits of their rights and obligations. The latest of these disagreements is whether employees who seek to improve working conditions through collective- and class-action litigation are engaged in protected concerted activity under [section]7 of the NLRA and, if they are, whether employment agreements waiving such rights constitute an unfair labor practice under [section]8(a) (1), since they would, by definition, interfere with those rights.

Late last year, the NLRB issued the second of two landmark decisions, holding that employee arbitration agreements waiving class or collective actions violate [section][section]7 and 8(a)(1) of the NLRA. The NLRB's first decision, In Re D. R. Horton, Inc., 357 NLRB No. 184 (2012), was soundly rejected by the Fifth Circuit in D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344 (5th Cir. 2013). District courts and other circuit courts across the country followed suit, and it seemed fairly certain that the NLRB's pioneering position, that class and collective actions constituted protected activity, had met a swift end. But the NLRB continued undeterred, forcing repeated litigation over the enforcement of its remedial orders, still finding that 1) collective and class-action waivers violate an employee's right under [section]7 of the NLRA to act in concert with each other; 2) and by seeking to enforce those waivers, employers are engaging in unfair labor practices under [section]8(a)(1).

In its second landmark decision, Murphy Oil, USA, Inc. and Sheila Hobson, 361 NLRB No. 72, 2014 WL 5465454 (Oct. 28, 2014), the NLRB condemned the federal courts' contrary holdings and, lest there be any doubt, set forth in arduous detail its steadfast resolve to move full steam ahead, making what had been no more than a small oil slick, quickly remedied, seem more like an ecological disaster. Since then, in Citigroup Tech., Inc. & Citicorp Banking Corp. (Parent), A Subsidiary of Citigroup, Inc. & Andrea Smith, an Individual, 2014 WL 7331823 (Dec. 23, 2014), the NLRB has made good on its promise to impose fee sanctions against an employer because it sought, successfully, to enforce a collective-action waiver. So, until there is a split in the circuits and the U.S. Supreme Court determines to resolve the conflict, employers seeking to enforce waivers of class or collective-action lawsuits should be prepared to face a long and costly battle to clean up the mess left behind by the Murphy Oil spill.

History of the Enforceability of Class Action Waivers Under the Federal Arbitration Act

Before the NLRB inserted itself into what appeared to be a well-settled legal dialogue, existing policy and Supreme Court precedent generally favored the enforcements of arbitration agreements containing class waivers. Under the Federal Arbitration Act (FAA), which provides the substantive law controlling their validity and enforcement, (2) arbitral agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of the contract." (3) "The FAA embodies a liberal federal policy favoring arbitration agreements," (4) which the Supreme Court expressed as early as 1983. (5)

In the employment context, class and collective-action waivers have also been held to be enforceable. Almost 25 years ago, the Supreme Court found no substantive right to class actions under the Age Discrimination in Employment Act (ADEA), (6) even though the statute provides for class procedures. (7) This is important because collective- or class-action waivers may be unenforceable, notwithstanding the FAA, when the statute "evinc[es] an intention to preclude a waiver of [collective]-action procedure" or, in other words, contains a "contrary congressional command." (8) Despite the inclusion of collective-action procedures, the Supreme Court found no express...