Sixth Circuit Adds To Circuit Split About The Enforceability Of Class And Collective Action Waivers In Employment Arbitration Agreements

The Sixth Circuit just became the third federal court of appeals to hold that an arbitration provision requiring employees covered by the National Labor Relations Act (NLRA) to arbitrate individually all employment-related claims is not enforceable. Nat'l Labor Relations Bd. v. Alternative Entm't, Inc., No. 16-1385, 2017 WL 2297620, at *9 (6th Cir. May 26, 2017). The court's decision sides with the Seventh and Ninth Circuits, which have reached similar holdings, to create a slight majority in the circuit split on the enforceability of such provisions. See Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted (U.S. Jan. 13, 2017); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted (U.S. Jan. 13, 2017). The Fifth and Eighth Circuits have reached the opposite conclusion, holding that class and collective action waivers are indeed enforceable. See NLRB v. Murphy Oil USA, Inc., 808 F.3d 1013 (5th Cir. 2015) (upholding its earlier holding in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013)), cert. granted (U.S. Jan. 13, 2017); Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772, 776 (8th Cir. 2016) (upholding its earlier holding in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013)).

In January, the United States Supreme Court granted certiorari review of Lewis, Morris, and Murphy Oil, which are now consolidated, to address whether class and collective action waivers in employment arbitration agreements are enforceable. See NLRB v. Murphy Oil USA, Inc., 137 S.Ct. 809 (2017).

The issue in these cases involves two seemingly conflicting federal statutes: the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., which states that arbitration agreements are valid, irrevocable and enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2, and the NLRA, 29 U.S.C. § 157 (section 7), which provides employees with the right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection...." The perceived tension between the statutes arises from the apparent contradiction between the FAA, on the one hand, which "manifest[s]" a "liberal federal policy favoring arbitration agreements," and section 7 of the NLRA, on the other hand, which prohibits contractual provisions that "illegally restrain" employees' rights under the NLRA." Alt. Entm't, 2017 WL 2297620, at *4 (internal quotations and citations...