The #MeToo Movement and Arbitration Clauses

By Ayesha N. Khan, Guest Contributor[i]

Unless you have been living under a rock, you know that the #MeToo movement has seized the cultural zeitgeist. Thousands of women have come forward to tell their stories and many powerful people have lost their positions on the heels of serious accusations. The entertainment industry, the political sphere, corporate boardrooms, and the judiciary have all been affected.

One corporation that has felt the heat is the ridesharing company Uber. After employee Susan Fowler sparked an uproar with allegations of sexual harassment and gender discrimination, an internal investigation led to more than 200 employee complaints and 20 terminations. Fowler will presumably sue Uber, but it remains to be seen whether she will join forces with others in doing so because, like many employers, Uber requires employees to sign a contract that commits them to resolving disputes through private, individual arbitration.

In a trio of consolidated cases – Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA, Inc., No. 16-307 – the U.S. Supreme Court is poised to address whether provisions like the one in Fowler’s employment contract will be given effect. The decision may have a greater impact on businesses and their employees than any other decision this term.

In recent years, the Supreme Court has largely upheld mandatory-arbitration provisions prohibiting collective action. See, e.g., DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468-71 (2015); Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309-12 (2013); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339-52 (2011). In doing so, the Court has principally relied on the Federal Arbitration Act’s directive that arbitration clauses are “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. As the Court has put it, the Arbitration Act requires courts to enforce arbitration agreements except when “a contrary congressional command” directs otherwise. CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012) (quoting Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987)). And thus far, at least in the consumer context, the Court has found competing statutory protections to be lacking.

In the employment context, however, the National Labor Relations Act may serve as a potential counterweight. The NLRA, which addresses private-sector employment practices, gives  “[e]mployees . . . the right to . . . engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157. An employer who restrains the exercise of that right engages in an “unfair labor practice.” 29 U.S.C. § 158. The National Labor Relations Board has concluded that these provisions preclude employers from requiring employees to forgo collective action for work-related disputes.  See, e.g., D.R. Horton, Inc. , 357 N.L.R.B. 2277, 2278-83 (2012), enforcement denied in relevant part, 737 F.3d 344 (5th Cir. 2013).

The federal courts of appeals, however, have reached conflicting results on the question. The Second and Fifth Circuits have held that the NLRA does not contain a “contrary congressional command” that overrides the Arbitration Act’s mandate to give effect to arbitration agreements. See D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 358, 360-61 (5th Cir. 2013); Sutherland v. Ernst & Young, LLP, 726 F.3d 290, 297 n.8, 298-99 (2d Cir. 2013) (per curiam). Indeed, the Fifth Circuit observed, the collective-bargaining provisions of the NLRA don’t “even mention arbitration.” D.R. Horton, 737 F.3d at 360. The Eighth Circuit reached the same result using a slightly different analysis. It reasoned that Congress must have intended the Arbitration Act to apply in the labor-relations setting because it reenacted the Act after the NLRA was passed. See, e.g., Owen v. Bristol Care, Inc., 702 F.3d 1050, 1053 (8th Cir. 2013).

Rather than focusing on whether the NLRA contains a “contrary congressional command,” courts rejecting the enforceability of collective-action waivers have emphasized the Arbitration Act’s saving clause, which provides that mandatory-arbitration clauses are “enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Seventh Circuit has held that the NLRA serves as one such ground, because the statute makes collective-action waivers illegal. Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1157 (7th Cir. 2016). In light of that result, the Seventh Circuit reasoned, the NLRA and the Arbitration Act are not in conflict, so it is irrelevant whether the NLRA includes a specific “contrary congressional command” regarding arbitration. Id. at 1156. The Ninth Circuit reached a similar result in Morris v. Ernst & Young, LLP, 834 F.3d 975, 986-87 (9th Cir. 2016).

In the Supreme Court, the employers reiterated the arguments accepted by the Second, Fifth, and Eighth Circuits, while their opponents rehashed the arguments that the Seventh and Ninth Circuits found persuasive. The United States, meanwhile, did both: at the certiorari stage, the Obama administration’s Department of Justice sided with the NLRB; but when it came time to brief the merits, the Trump administration submitted a brief siding with employers. The Justice Department is now at odds with the NLRB (which filed its own brief), creating the unusual circumstance of two arms of the federal government appearing on opposite sides of a case.

If that weren’t enough, more than two dozen amici curiae have weighed in. The amicus line-up pits the corporate world and the defense bar against unions, trial lawyers, and civil-rights organizations – making it clear that the case involves much more than fine points of statutory construction. The stakes for an employer rise dramatically when hundreds or thousands of employees sue together; potential damages can jump from hundreds of thousands of dollars to hundreds of millions. Those multi-million-dollar awards, in turn, are a big draw for class-action lawyers. Indeed, many aggrieved employees will be unable to find representation when only individual damages are at stake. That, my friends, is what the case is really about.

A decision is expected by the end of June 2018.

[i] The author is a partner at Potomac Law Group. As with all Maryland Appellate Blog posts, the views expressed here are the author’s, and not those of her firm.