October 4, 2017

Supreme Court Hears Argument Challenging 21st Century Yellow-Dog Contracts

by Ruben J. Garcia, Associate Dean for Faculty Development and Research, William S. Boyd School of Law, University of Nevada Las Vegas. Garcia is a member of the ACS Board of Directors and Board of Academic Advisors.

In 1932 and 1935, Congress declared the public policy of the United States in labor matters as follows:

“[I]t is necessary that [the individual unorganized worker] have full freedom of association, self-organization…in the designation of such representatives or in self-organization, or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”.

In Section 3 of the Norris LaGuardia Act, Congress declared that contracts which conflict with the public policy declared above to be “unenforceable in any court of the United States.” Congress has not repealed or retracted these declarations.

Now over 80 years later, the truth of these propositions is being tested in the Supreme Court in Epic Systems v. Lewis, consolidated with Ernst & Young v. Morris and NLRB v. Murphy Oil. The case, which was argued on the first Monday in October Term 2017, tests whether the congressionally declared purposes in Norris La-Guardia and the National Labor Relations Act of 1935 (NLRA) to better equalize bargaining power between employers and employees will still be honored in the 21st Century. After decades of Supreme Court decisions that have favored mandatory arbitration over state laws, the Supreme Court has not yet confronted the clash between the federal labor laws of the 1930s and the Federal Arbitration Act of 1925 (FAA).

In the Official Transcript of the oral argument released yesterday, Justice Stephen Breyer put the tension directly before attorney Paul Clement. Clement argued on behalf of the companies in all three consolidated cases:

Justice Breyer: “What we have here is a statute, two of them, Norris-La Guardia, the NLRA…The statute protects the workers when two workers join together to go into a judicial or administrative forum for the purpose of improving working conditions and the employers here all said, we will employ you only if you promise not to do that. Okay? I haven’t seen a way that you can, in fact win the case, which you certainly want do, without undermining and changing radically what has gone back to the New Deal, that is, the interpretation of Norris-LaGuardia and the NLRA.”

Justice Ruth Bader Ginsburg called these group action waivers “yellow dog” agreements, after the early 20th Century contracts which conditioned employment on not organizing or joining a union. The Supreme Court approved these contracts on “freedom of contract” grounds in Coppage v. Kansas in 1915, but Norris La-Guardia specifically overruled that decision in 1932.

Justice Ginsburg: “This has all the same—the essential features of the “yellow dog” contract.  That is, there is no true liberty of contract on the part of the employee, and that’s what Norris-LaGuardia wanted to exclude.”

In all three consolidated cases, the employer sought to prevent the employees from proceeding in a collective action under federal law for back wages due by moving to compel performance of the arbitration agreement, which required workers to proceed individually. Justice Elena Kagan asked why the employer’s attempted enforcement of the group action waivers was not directly covered but the Norris LaGuardia Act.

Justice Kagan:  “What about section 102 of Section 103 of the Norris-LaGuardia Act. . . . Any undertaking or promise in conflict with—-essentially the same language as Section 7 — shall not be enforceable in any court.  So what about that.”

Clement answered that the prohibitions of Norris-LaGuardia “assume[d] the conclusion,” because “you didn’t have a freestanding right to proceed with class arbitration in an arbitral forum.  You had a right to go to whatever forum and abide by those rules, and one of the rules in the arbitral forum is no class action.”

When Principal Deputy Solicitor General Jeffrey Wall was at the lectern, Justice Samuel Alito wanted an answer to the Norris-LaGuardia questions, asking: “Is [Norris-LaGuardia] not before us, is it so closely tied to the NLRA issue that it is appropriate for us to decide it?”  Wall answered that the issue was not before the Court, and even it was, Wall said: “I don’t think it adds anything.”

Then, Wall was asked about the potential conflict between his argument and another federal statute, Title VII of the Civil Rights Act of 1964.  Justice Kagan asked, “I do think both you and Mr. Clement agree that, if you had a discriminatory arbitration agreement, let’s say an arbitration agreement that said that the employer will pay for the arbitration costs of men, but not women, that would not be enforceable, why not?”

Wall responded, “If that case came to the Court, I think we would have no trouble concluding that the ADA and Title VII supply a clear congressional command, and . . . .”

Justice Kagan: “Okay. So, if that’s the case and you are saying there can be a conflict between statutes and Title VII would supply a clear congressional command, even though Title VII says absolutely nothing about arbitration.”

Wall responded:   “Well, again, I don’t think it is a magic words test—and we agree with Petitioners on that. You a have a clear congressional command absent that.  You just don’t have it in Section 7.”

Wall continued and concluded the United States’s argument, at odds with its Executive Branch agency the National Labor Relations Board which enforces the NLRA: “Justice Kagan, it is not a fundamental attribute of arbitration to discriminate on the basis of race, age, or gender.  It is a fundamental attribute of arbitration, and this Court said it three times, to pick the parties with whom you arbitrate.”

He continued: “And our simple point is this case is at the heartland of the FAA. It is at best, at the periphery of the NLRA, on the margins of its ambiguity, and you simply can’t get there under the Court’s cases.”

With that, Wall and the Trump Administration presented the Court with a stark choice—side with the employers who have the bargaining power to “pick” the parties with whom they arbitrate and further relegate workers to the “margins of the [the NLRA’s] ambiguity,” or effectuate Congress’s purpose in the Norris-LaGuardia and National Labor Relations Acts to protect employees’ ability to engage in “concerted activity for their own mutual aid and protection,” in order to improve the bargaining power of all workers.  Although Justice Neil Gorsuch did not ask questions during the argument, his views might be dispositive when the case is decided later this Supreme Court Term.

*Ruben J. Garcia is author of the book Marginal Workers: How Legal Fault Lines Divide Workers and Leave Them Without Protection (NYU Press)