Supreme Court to determine future of employer arbitration agreements, lower courts divided on issue

By David Yates | Aug 15, 2017

NEW ORLEANS – Earlier this month, the U.S. Court of Appeals for the Fifth Circuit sided against the National Labor Relations Board, finding that Convergys Corp. has the right to require employees to arbitrate disputes against the company, keeping them from initiating class action lawsuits.

NEW ORLEANS – Earlier this month, the U.S. Court of Appeals for the Fifth Circuit sided against the National Labor Relations Board, finding that Convergys Corp. has the right to require employees to arbitrate disputes against the company, keeping them from initiating class action lawsuits.

The mounting issue of class action waivers has turned out conflicting decisions in courts on all levels, federal and state.

So much so, that the U.S. Supreme Court recently announced that on the first day of its upcoming October term it will hear oral arguments on three consolidated cases addressing whether employer arbitration agreements violate the National Labor Relations Act provision that non-supervisory employees have a right to engage in "concerted activities" for mutual aid and protection.

Depending on which way justices are swayed, the Supreme Court could effectively end employment class action litigation or perhaps make the enforcement of employee arbitration a thing of the past.

Two of the consolidated cases before the Supreme Court are decisions by the Seventh and Ninth Circuits, which, in contrast to the Fifth Circuit’s Aug. 7 findings, adopted NLRB's position that the NLRA invalidates employment class action waivers in employment arbitration agreements.

In the Convergys ruling, the Fifth Circuit found that the company, contrary to the determination of the NLRB, did not engage in an unfair labor practice by requiring applicants to sign a waiver or by seeking to enforce that waiver.

Convergys requires job applicants to sign an agreement that includes a waiver prohibiting them from pursuing lawsuits against the company, which includes starting or joining class actions.

The Fifth Circuit ruling stems from a class action brought by a Convergys employee who, despite having signed the agreement, brought a class action against the company, asserting Fair Labor Standards Act claims.

The employee also filed charges with the NLRB, arguing the company interfered with employee rights by maintaining and enforcing the waiver agreement.

A federal court denied Convergys’ motion to strike. The company then settled the FLSA lawsuit and the employee requested to withdraw the charges filed with the board, court records show.

However, the NLRB’s general counsel issued a complaint alleging that Convergys had violated Section 8(a)(1) of the NLRA by requiring job applicants to sign the waiver and by seeking to enforce the waiver in the employee's lawsuit.

On appeal, the NLRB relied on Section 7 of the NLRA, which states: “Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”

The Fifth Circuit found the board's position that Section 7 guarantees a substantive right of employees to participate in class and collective actions against their employers is contrary to a past and binding precedent – the 2013 decision in D.R. Horton v. NRLB.

The Supreme Court's decision on the issue will most likely be delivered in early 2018.

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