25 WH Cases2d 942

Lewis v. Epic Sys. Corp.

U.S. District Court,
Western District of Wisconsin
No. 15-cv-82-bbc
September 10, 2015
2015 BL 294620
LEWIS, J., individually and on behalf of all others similarly situated,
Plaintiff v. EPIC SYSTEMS CORPORATION, Defendant
Headnotes
FAIR LABOR STANDARDS ACT
[1] Unpaid overtime Collective claims Arbitration National
Labor Relations Act Federal Arbitration Act 136.01 411.01
510.18 510.2305
Arbitration provision that waived employees' right to bring class-action claims
and requires employees to arbitrate claims only on an individual basis is
found by federal district court to be unconscionable, thus court declines to
compel arbitration of technical writer's collective FLSA overtime claims in
light of arbitration agreement's provision stating that any claim brought on a
class, collective or representative action basis must be filed in a court of
competent jurisdiction, and such court shall be the exclusive forum for such
claims if arbitration agreement's waiver of class and collective claims is
found to be unenforceable, where court relies on its prior decision that found
similar waiver in arbitration agreement unconscionable after deciding that
Fifth Circuit's split decisionwhich declined to enforce In re D.R. Horton, Inc.,
357 NLRB No. 184, 194 LRRM 3089 (2012), that invalidated waiver of
collective actionto be unavailing because appellate court's majority never
persuasively rebutted board's conclusion that collective-litigation waiver
violates National Labor Relations Act and never explained why, if there is
tension between NLRA and Federal Arbitration Act, it is FAA that should trump
NLRA rather than reverse.
Attorneys
Breanne L. Snapp, Daniel A. Rottier, Jason J. Knutson, and James R. Jansen
(Habush Habush & Rottier S.C.), Madison, Wis., and Caitlin M. Madden, David
C. Zoeller, William E. Parsons, and Katelynn M. Williams (Hawks Quindel Ehlke
& Perry, S.C.), Madison, Wis.,for plaintiff.
Noah A. Finkel and Andrew Lylburn Scroggins (Seyfarth Shaw LLP), Chicago,
Ill., for defendant.
Opinion Text
Opinion By:
CRABB, District Judge.
Plaintiff J. Lewis was a technical writer for defendant Epic Systems
Corporation. In this proposed collective action, plaintiff contends that
defendant misclassified his position as exempt from the requirement to pay
overtime wages under the Fair Labor Standards Act. Defendant has filed a
motion to dismiss the case on the ground that plaintiff's claims are subject to
an arbitration agreement. Dkt. #19. Plaintiff concedes that his claims fall
within
Page 943
the scope of the arbitration agreement, but he argues that the agreement is

invalid because it is unconscionable. Alternatively, he says that the court

should invalidate the provision in the agreement called Waiver of Class and
Collective Claims, which requires employees to arbitrate claims only on an
individual basis.
In this case, it makes sense to consider the second argument first because it
may be dispositive. As plaintiff points out, the arbitration agreement includes
the following savings clause: [I]f the Waiver of Class and Collective Claims
is found to be unenforceable, then any claim brought on a class, collective or
representative action basis must be filed in a court of competent jurisdiction,
and such court shall be the exclusive forum for such claims. Dkt. #22-1 at 3.
Thus, if I conclude that the waiver is invalid, plaintiff's challenge to the rest of
the arbitration agreement is moot.
[ 1 ] As the parties acknowledge, I considered a similar waiver in an
arbitration agreement in Herrington v. Waterstone Mortgage Corp., No. 11-cv779-bbc (W.D. Wis.). In that case, the agreement stated that [s]uch
arbitration may not be joined with or join or include any claims by any
persons not party to this Agreement. In an order dated March 16, 2012, I
concluded that the waiver was inconsistent with In re D.R. Horton, Inc., 357
NLRB No. 184 [192 LRRM 1137] (2012), available at 2012 WL 36274, in which
the National Labor Relations Board held that an employer violates the
National Labor Relations Act by entering into individual arbitration
agreements that include a prohibition on collective actions by employees.
The board's reasoning was straightforward. Under the NLRA, [e]mployees
shall have the right to engage in concerted activities for the purpose of
mutual aid or protection. 29 U.S.C. 157. Both courts and the board have
found consistently that lawsuits for unpaid wages brought by multiple
plaintiffs may be one type of concerted activity protected by 157 and
158(a)(1). Brady v. National Football League, 644 F.3d 661, 673 [190 LRRM
3441] (8th Cir. 2011) ([A] lawsuit filed in good faith by a group of employees
to achieve more favorable terms or conditions of employment is concerted
activity under 7 of the National Labor Relations Act.); Leviton
Manufacuring Co., Inc. v. NLRB, 486 F.2d 686, 689 [[84 LRRM 2670] (1st Cir.
1973) ([T]he filing of a labor related civil action by a group of employees is
ordinarily a concerted activity protected by 7, unless the employees acted
in bad faith.); Saigon Gourmet Restaurant, 353 NLRB No. 110 [186 LRRM
1081] (2009) ([A] wage and hour lawsuit [is] clearly protected concerted
activity.); In re 127 Restaurant Corp., 331 NLRB 269, 269 [170 LRRM 1447]
(2000) (lawsuit filed on behalf of 17 employees regarding wages was
protected activity); 52nd Street Hotel Associates, 321 NLRB 624, 624 [152
LRRM 1201] (1996) (collective action brought under FLSA was protected
activity), abrogated on other grounds by Stericycle, Inc., 357 NLRB No. 61
[191 LRRM 1113] (2011); Host International, 290 NLRB 442, 443 [129 LRRM
1041] (1988) (multiple-plaintiff lawsuit concerning working conditions was
protected activity); United Parcel Service, Inc., 252 NLRB 1015, 1016 [105
LRRM 1484] (1980) (class action lawsuit regarding lunch breaks is protected
activity), enforced, 677 F.2d 421, 422 [113 LRRM 2035] (6th Cir. 1982); Trinity
Trucking & Materials Corp., 221 NLRB 364, 364 [90 LRRM 1499] (1975) (filing
of lawsuit by group of employees for failure to pay wages in accordance with
contract was protected activity), enforced, 567 F.2d 391 (7th Cir. 1977).
Further, under 29 U.S.C. 158(a)(1), employers may not interfere with,

restrain, or coerce employees in the exercise of an employee's rights under

157. Citing J.I. Case Co. v. NLRB, 321 U.S. 332 [14 LRRM 501] (1944), and
NLRB v. Stone, 125 F.2d 752, 756 [9 LRRM 578] (7th Cir. 1942), the board
concluded in Horton, 2012 WL 36274, at *7, that an employer interferes with
an employee's right to engage in concerted activities by requiring her to sign
an agreement that includes a prohibition on collective actions by employees.
See also Eastex, Inc. v. NLRB, 437 U.S. 556, 565-66 [98 LRRM 2717] (1978)
([T]he mutual aid or protection clause protects employees from retaliation
by their employers when they seek to improve working conditions through
resort to administrative and judicial forums.). Finally, the board concluded
that there is no conflict between the Federal Arbitration Act and the NLRA
because the
Page 944
Federal Arbitration Act does not require the enforcement of arbitration
agreements that conflict with substantive provisions of federal law.
Noting that courts must give considerable deference to the Board's
interpretations of the NLRA, ABF Freight System, Inc. v. NLRB, 510 U.S. 317,
324 [145 LRRM 2257] (1994), I concluded that the board's decision was
reasonably defensible and therefore controlling. Sure-Tan, Inc. v. NLRB, 467
U.S. 883, 891 [116 LRRM 2857] (1984). Accordingly, I invalidated the waiver
on collective action in the arbitration agreement and I determined that the
plaintiff must be allowed to join other employees to her case. Herrington v.
Waterstone Mortgage Corp., No. 11-cv-779-bbc, 2012 WL 1242318, at **6-7
(W.D. Wis. Mar. 16, 2012).
Two years later (while the case was pending before the arbitrator), the
employer sought reconsideration of the decision on the ground that new case
law supported a view that employees cannot rely on the NLRA to invalidate
arbitration provisions that prohibit joint litigation. The employer relied
primarily on D.R. Horton, Inc. v. NLRB, 737 F.3d 344 [197 LRRM 2637] (5th Cir.
2013), a split decision in which the Court of Appeals for the Fifth Circuit
declined to enforce the board's order invalidating the waiver on collective
action. Although I denied the employer's motion on procedural grounds, I also
analyzed the appellate court's decision in detail. I chose to adhere to the
board's decision because the majority never persuasively rebutted the
board's conclusion that a collective litigation waiver violates the NLRA and
never explained why, if there is tension between the NLRA and the FAA, it is
the FAA that should trump the NLRA, rather than the reverse. Herrington v.
Waterstone Mortgage Corp., 993 F.Supp.2d 940, 943-46 [21 WH Cases2d
1670] (W.D. Wis. 2014). Further, the other cases cited by the employer did
not include additional reasoning.
In this case, defendant does not identify any way to distinguish its collective
action waiver from the waiver considered in Herrington. Although defendant
asks the court to reconsider its prior deference to the board's decision,
Dft.s Br., dkt. #20, at 10, defendant does not challenge the reasoning in
Herrington or otherwise develop an argument in favor of a different result. It
simply cites the cases in which courts have declined to follow the board.
As I did in Herrington, 993 F.Supp.2d at 941, I acknowledge that the weight
of authority favors defendant's view. It may be that ultimately the
Supreme Court or the Court of Appeals for the Seventh Circuit will agree with
defendant, but until that time, I will adhere to the decision of the board.

Accordingly, I am denying defendant's motion to dismiss.

ORDER
IT IS ORDERED that defendant Epic Systems Corporation's motion to
dismiss, dkt. #19, is DENIED.
- End of Case 197 LRRM 2637
D.R . Horton , Inc. v. NLRB
U.S. Court of Appeals,
Fifth Circuit
No. 12-60031
December 3, 2013
2013 BL 335349
737 F.3d 344
D.R . HORTON , INCORPORATED, Petitioner/Cross-Respondent v.
NATIONAL LABOR RELATIONS BOARD, Respondent/Cross-Petitioner
Headnotes
NATIONAL LABOR RELATIONS ACT
[1] Authority of NLRB Recess appointment Quorum 34.05
40.05 94.23 94.25
Fifth Circuit declines to address validity of recess appointment of member of
NLRB on review of order finding that employer unlawfully required employees
to sign mutual arbitration agreement waiving their right to pursue classaction claims in any forum, even though D.C. Circuit, in Noel Canning v. NLRB,
705 F.3d 490, 194 LRRM 3089 (D.C. Cir. 2013), vacated order of threemember board based on determination that appointments to board during
intrasession recess were invalid, since challenges under appointments clause
are nonjurisdictional objections that are within court's discretion to consider,
jurisdiction of federal circuit court is derived from board's petition for review
and not validity of underlying decision, and answering this newly-raised
question would have only marginal effect on case.
[2] Authority of NLRB Recess appointment Expiration Quorum
34.05 40.05 94.23 94.25
Employer failed to show that recess appointment of member of threemember board expired before NLRB issued order finding that employer
unlawfully required employees to sign mutual arbitration agreement
waiving their right to pursue class-action claims in any forum, and thus that
board lacked quorum to issue order, even though recess appointments expire
at end of next U.S. Senate session, and despite contention that next session
ended before board issued order when Senate adjourned or held last pro
forma session, since simple act of adjournment does not end session, session
ended immediately before next Senate session began at noon on date of
board's order because there was no sine die adjournment on earlier date,
whether order was entered prior to noon is unclear from record, andto this
limited extent onlyde facto officer doctrine confers validity on acts
performed by person acting under color of official title.
[3] Authority of NLRB Quorum Delegation of power 34.05
40.05 94.23 94.25
NLRB properly delegated power to three-member panel that issued order

finding that employer unlawfully required employees to sign mutual

arbitration agreement waiving their right to pursue class-action claims in
any forum, despite contention that delegation did not occur because there is
no order or other evidence of express delegation, since no party has provided
authority that express delegation is required before three-member panel may
act, there is no indication that board deviated from customary practice of
delegating power, and court will infer that board gave itself power to act as
three members when it decided to act.
[4] NLRB Ruling Judicial notice Matters not presented before
NLRB 38.25 71.01
Fifth Circuit will not take judicial notice of (1) demand for individual arbitration
by employee who later sought to initiate class claims alleging violation of Fair
Labor Standards Act and (2) employee's letter to regional director of NLRB
seeking to withdraw his unfair-labor-practice charge against employer,
despite contentions that order of NLRB created novel presumption that
individual who files class-action demand necessarily seeks to initiate group
action, and that order conflicts with procedural history of case because
demand named employee as single plaintiff and letter referred only to
employee, since documents were never before board, and arbitration
demand described parties as including all other similarly situated
employees.
Page 2638
[5] Interference Arbitration agreement Class-action waiver
Federal Arbitration Act Savings clause' 50.06 50.45 71.01
94.07 94.23 94.25
NLRB erred in finding that employer unlawfully required employees to sign
mutual arbitration agreement waiving their right to pursue class-action
claims in any forum, even though savings clause of FAA allows for nonenforcement of arbitration agreements on any grounds as exist at law or in
equity for revocation of any contract, and despite contention that agreement
violated collective-action provisions of NLRA, since U.S. Supreme Court held
that savings clause of FAA was inapplicable to California prohibition on classaction waivers because requiring availability of class-wide arbitration creates
scheme inconsistent with FAA, there is little incentive for lawyers to arbitrate
on behalf of individuals when they may do so for class and reap far higher
fees in process, employers would have little incentive to continue resolving
potentially duplicative claims on individual basis if faced with inevitable class
arbitration, and thus, requiring class mechanism is actual impediment to
arbitration.
[6] Interference Arbitration agreement Class-action waiver
Federal Arbitration Act 50.06 50.45 71.01 94.07 94.23 94.25
In case in which employee and nationwide class sought to initiate arbitration
of claims that employer improperly classified them as exempt from statutory
overtime protections of Fair Labor Standards Act, NLRB erred in finding that
employer had unlawfully required employees to sign mutual arbitration
agreement waiving their right to pursue class-action claims in any forum,
even though NLRA was enacted after FAA, and despite contention that NLRA
contains congressional command to override FAA, since NLRA was enacted
and reenacted prior to advent of modern class-action practice, text of NLRA
does not contain explicit language of intent to override FAA, legislative

history of NLRA only supports congressional intent to level the playing field
between workers and employers, courts repeatedly have understood NLRA to
permit and require arbitration, and right to collective action cannot be
successfully defended on ground that it provides employees with greater
bargaining power.
[7] Interference Arbitration agreement Section 7 rights
Remedies 50.06 50.45 56.501 94.25
NLRB is entitled to enforcement of order requiring employer to rescind or
revise mutual arbitration agreement to clarify that employees are not
prohibited from filing unfair-labor-practice charges with board, even though
agreement refers to court, judge and jury, since references are
insufficient to counter breadth of waiver created by phrase right to file a
lawsuit or other civil proceeding, employer violates Section 8(a)(1) of NLRA if
employees would reasonably construe language to prohibit Section 7 activity,
and agreement's use of seemingly incompatible languagewhich refers to
court actions in one sentence and agency actions in anothermeans that
employee would reasonably read agreement as also precluding unfair-laborpractice charges.
Case History and Disposition
Petition for review and cross-application for enforcement of an NLRB order
(357 NLRB No. 184, 12-CA-25764, 192 LRRM 1137). Review granted;
enforcement granted in part and denied in part.
Attorneys
Ronald Wayne Chapman Jr. (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.),
Dallas, Texas, Bernard Phillip Jeweler (Ogletree, Deakins, Nash, Smoak &
Stewart, P.C.), Washington, D.C., Christopher Charles Murray (Ogletree,
Deakins, Nash, Smoak & Stewart, P.C.), Indianapolis, Ind., and Michael M.
Shetterly and Mark M. Stubley (Ogletree, Deakins, Nash, Smoak & Stewart,
P.C.), Greenville, S.C., for petitioner.
Kira Dellinger Vol (Stuart F. Delery, Acting Assistant Attorney General, Beth S.
Brinkmann, Deputy Assistant Attorney General, Scott R. McIntosh, Sarang V.
Damle, Melissa N. Patterson, and Benjamin M. Shultz, and Lafe E. Solomon,
Acting General Counsel, Celeste J. Mattina, Deputy General Counsel, John H.
Ferguson, Associate General Counsel, Linda Dreeben, Deputy Associate
General Counsel, and Ruth E. Burdick, Supervisory Attorney, on brief), for
respondent.
William J. Emanuel and Vartan Serge Madoyan (Littler Mendelson, P.C.), Los
Angeles,
Page 2639
Calif., and Henry David Lederman and Alexa L. Woerner (Littler Mendelson,
P.C.), Walnut Creek, Calif., on brief for amicus curiae Coalition for a
Democratic Workplace.
Catherine M. Masters (Schiff Hardin, L.L.P.), Chicago, Ill., on brief for amicus
curiae National Retail Federation.
Paul William Cane Jr. (Paul Hastings, L.L.P.), San Francisco, Calif., on brief for
amicus curiae National Association of Manufacturers.
Rae Thiesfield Vann (Norris, Tysse, Lampley & Lakis, L.L.P.), Washington, D.C.,
on brief for amicus curiae Equal Employment Advisory Council.
Alfred John Harper II (Morgan, Lewis & Bockius LLP), Houston, Texas, on brief
for amicus curiae Council on Labor Law Equality.

Mark Douglas Temple (Reed Smith, L.L.P.), Houston, Texas, on brief for amici
curiae Society for Human Resource Management and Human Resource Policy
Association.
Charles C. High Jr., Clara Beth Burns and Jose Abelardo Howard-Gonzalez
(Kemp Smith, L.L.P.), El Paso, Texas, for amicus curiae Texas Association of
Business.
Marshall Bruce Babson (Seyfarth Shaw LLP), New York, N.Y., on brief for
amicus curiae Chamber of Commerce of the United States of America.
Deborah J. La Fetra (Pacific Legal Foundation), Sacramento, Calif., on brief for
amici curiae Pacific Legal Foundation and National Federation of Independent
Business Small Business Legal Center.
Hal K. Gillespie, Joseph Halcut Gillespie and Yona Rozen (Gillespie, Rozen &
Watsky, P.C.), Dallas, Texas, on brief for amicus curiae National Employment
Lawyers Association.
Frank Paul Bland Jr. (Public Justice, P.C.), Washington, D.C., on brief for amici
curiae Public Justice and Public Citizen, Incorporated.
Michael Rubin (Altshuler Berzon LLP), San Francisco, Calif., on brief for amici
curiae Service Employees International Union, American Federation of LaborCongress of Industrial Organizations and Alton J. Sanders.
Judge
Before KING, SOUTHWICK, and GRAVES, Circuit Judges.
Opinion Text
Opinion By:
SOUTHWICK, Circuit Judge.
The National Labor Relations Board held that D.R . Horton , Inc. had violated
the National Labor Relations Act by requiring its employees to sign an
arbitration agreement that, among other things, prohibited an employee from
pursuing claims in a collective or class action. On petition for review, we
disagree and conclude that the Board's decision did not give proper weight to
the Federal Arbitration Act. We uphold the Board, though, on requiring Horton
to clarify with its employees that the arbitration agreement did not eliminate
their rights to pursue claims of unfair labor practices with the Board.
FACTS AND
PROCEDURAL HISTORY
Horton is a home builder with operations in over twenty states. In 2006,
Horton began requiring all new and existing employees to sign, as a condition
of employment, what it called a Mutual Arbitration Agreement. Three of its
provisions are at issue in this appeal. First, the agreement provides that
Horton and its employees voluntarily waive all rights to trial in court before a
judge or jury on all claims between them. Second, having waived their rights
to a judicial proceeding, Horton and its employees agreed that all disputes
and claims would be determined exclusively by final and binding
arbitration, including claims for wages, benefits, or other compensation.
Third, Horton and its employees agreed that the arbitrator [would] not have
the authority to consolidate the claims of other employees and would not
have the authority to fashion a proceeding as a class or collective action or to
award relief to a group or class of employees in one arbitration proceeding.
These provisions meant that employees could not pursue class or collective
claims in an arbitral or judicial forum. Instead, all employment-related
disputes were to be resolved through individual arbitration.

Michael Cuda worked for Horton as a superintendent from July 2005 to April
2006; he signed a Mutual Arbitration Agreement. In 2008, Cuda and a
nationwide class of similarly situated superintendents sought to initiate
arbitration of their claims that Horton had misclassified them as exempt from
statutory
Page 2640
overtime protections in violation of the Fair Labor Standards Act (FLSA).
Horton responded that the arbitration agreement barred pursuit of collective
claims, but invited Cuda and the other claimants to initiate individual
arbitration proceedings. Cuda then filed an unfair labor practice charge,
alleging that the class-action waiver violated the National Labor Relations Act
(NLRA).
On January 3, 2011, an administrative law judge held that the Mutual
Arbitration Agreement violated Sections 8(a)(1) and (4) of the NLRA 1 because
its language would cause employees reasonably to believe they could not file
unfair labor practice charges with the Board. On January 3, 2012, the Board
issued a decision by two of its membersChairman Mark Gaston Pearce and
Member Craig Becker. Their order upheld the ALJ's determination that the
Mutual Arbitration Agreement violated Section 8(a)(1) because employees
would reasonably interpret its language as precluding or restricting their right
to file charges with the Board. 2 The panel also determined, contrary to the
ALJ's decision, that the agreement violated Section 8(a)(1) because it
required employees to waive their right to maintain joint, class, or collective
employment-related actions in any forum. The panel ordered Horton to
rescind or revise the agreement to clarify that employees were not prohibited
from filing charges with the Board, nor were they prohibited from resolving
employment-related claims collectively or as a class. Horton filed a timely
petition for review of the panel's decision, and the Board cross-applied for
enforcement of the panel's order.
1
It shall be an unfair labor practice for an employer
(1) to interfere with, restrain, or coerce employees in the exercise of the
rights guaranteed in [Section 7];

(4) to discharge or otherwise discriminate against an employee because he

has filed charges or given testimony under this subchapter.
29 U.S.C. 158(a)(1) & (4).
2
Brian Hayes, while listed as a panel member, recused himself.
DISCUSSION
This court will uphold the Board's decision if it is reasonable and supported
by substantial evidence on the record considered as a whole. Strand Theatre
of Shreveport Corp. v. NLRB, 493 F.3d 515, 518 [182 LRRM 2324] (5th Cir.
2007); see also 29 U.S.C. 160(e). Substantial evidence is such relevant
evidence as a reasonable mind would accept to support a conclusion. J.
Vallery Elec., Inc. v. NLRB, 337 F.3d 446, 450 [172 LRRM 2929] (5th Cir. 2003)
(quotation marks omitted). In light of the Board's expertise in labor law, we
will defer to plausible inferences it draws from the evidence, even if we might
reach a contrary result were we deciding the case de novo. Id. This
deference extends to both the Board's findings of facts and its application of
the law. Id. While the Board's legal conclusions are reviewed de novo,
Strand, 493 F.3d at 518, its interpretation of the NLRA will be upheld so long

as it is rational and consistent with the Act. Litton Fin. Printing Div., a Div. of
Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 201 [137 LRRM 2441] (1991)
(quotation marks omitted).
I. Issues Regarding Composition of Board
A. Validity of Recess Appointment of Board Member
[ 1 ] Late in the process for our review of these rulings, a sister circuit issued
an opinion that, were we to adopt its reasoning, might result in our holding
that the Board's rulings are of no effect because one of its members was
improperly appointed. See Noel Canning v. NLRB, 705 F.3d 490 [194 LRRM
3089] (D.C. Cir. 2013), cert. granted 133 S.Ct. 2861 (U.S. June 24, 2013) (No.
12-281). 3 The D.C. Circuit vacated the order of a three-member panel of the
Board based on its determination that the recess appointments of the panel
members were invalid. Id. at 499. The Recess
Page 2641
Appointments Clause of the Constitution empowers the President to fill up all
Vacancies that may happen during the Recess of the Senate. U.S. Const. art.
II, 2, cl. 3. The court held that the clause applies only to recesses that occur
between the two annual sessions of Congress, not recesses within a session.
Noel Canning, 705 F.3d at 503. Because the appointments were not made
during an intersession recess, they were invalid. Id. at 507.
3
The Supreme Court granted certiorari to consider: (1) Whether the
President's recess-appointment power may be exercised during a recess that
occurs within a session of the Senate, or is instead limited to recesses that
occur between enumerated sessions of the Senate and (2) Whether the
President's recess-appointment power may be exercised to fill vacancies that
exist during a recess, or is instead limited to vacancies that first arose during
that recess. Petition for Writ of Certiorari, NLRB v. Canning, 2013 WL
1771081, at *1 (No. 12-1281). In addition to the questions presented in the
petition for writ of certiorari, the Court directed the parties to brief and argue
a third question: Whether the President's recess-appointment power may be
exercised when the Senate is convening every three days in pro forma
sessions. Order Granting Certiorari, NLRB v. Canning, 133 S.Ct. 2861 (June
24, 2013).
The court also addressed whether the vacancies were invalid because they
did not happen during a Senate recess. Id. Examining different possible
definitions of happen, the court held that a vacancy happens only when it
first arises, demonstrating that the Recess Appointments Clause requires that
the relevant vacancy arise during the recess. Id. Consequently, the court
held that the appointments were also invalid because the vacancies preexisted the recess in which the appointments were made. Id. at 514.
Although Noel Canning is not binding on this court, it calls into question the
constitutionality of Member Becker's recess appointment and the resulting
validity of the Board's order. Horton , though, has never challenged the
constitutionality of Member Becker's appointment. It has argued instead that
Member Becker's appointment expired before the decision was issued. In
light of Noel Canning, we asked the parties to submit new briefing regarding
whether, for jurisdictional reasons, we must consider the constitutionality of
Member Becker's appointment. We conclude that we do not.
First, the NLRA's jurisdictional statement supports the conclusion that we are
not deprived of appellate jurisdiction because of defects in a Board order:

The Board shall have power to petition any court of appeals of the United
States for the enforcement of such order. Upon the filing of such
petition, the court shall have jurisdiction of the proceeding and of the
question determined therein, and shall have power to make and enter a
decree enforcing, modifying and enforcing as so modified, or setting aside in
whole or in part the order of the Board.
29 U.S.C. 160(e) (emphasis added). This court's jurisdiction is derived from
the Board's filing of a petition, not from the validity of the Board's underlying
decision.
Second, challenges under the Appointments Clause are nonjurisdictional
structural constitutional objections that are within a court's discretion to
consider. Freytag v. Commissioner, 501 U.S. 868, 878-79 (1991). In Freytag,
the Supreme Court considered a belated challenge to a special trial judge's
appointment, but made clear that doing so was a discretionary exercise
appropriate only in rare cases. Id. at 879. Applying that decision, both the
Sixth and the Eighth Circuits have determined that challenges to the Board's
composition are nonjurisdictional. See NLRB v. RELCO Locomotives, Inc., 734
F.3d 764, 2013 WL 4420775, at *26-28 [196 LRRM 2609] (8th Cir. 2013);
GGNSC Springfield LLC v. NLRB, 721 F.3d 403, 406-07 [196 LRRM 2218] (6th
Cir. 2013); see also Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd.,
574 F.3d 748, 755-56 (D.C. Cir. 2009) (declining to consider constitutional
challenge to copyright royalty judges appointment). 4
4
The Third Circuit has resolved the issue differently, holding that the Board's
three-member-composition requirement is jurisdictional. See NLRB v. New
Vista Nursing & Rehab., 719 F.3d 203, 212 [195 LRRM 2781] (3d Cir. 2013).
But as the RELCO court observed, the court in New Vista was partly
constrained by prior Third Circuit precedent that the overall authority of the
Board to hear [a] case under the NLRA is a jurisdictional question that may be
raised at any time. New Vista, 719 F.3d at 210 (alteration in original)
(quoting NLRB v. Konig, 79 F.3d 354, 360 [151 LRRM 2682] (3d Cir. 1996))
(internal quotation marks omitted).
Third, the Noel Canning court itself did not hold that the constitutional issues
implicated subject matter jurisdiction. Rather, it first resolved the appellant's
statutory arguments. See Noel Canning, 705 F.3d at 493. Had the court
considered the appellant's constitutional arguments as affecting the court's
jurisdiction, it would have had to consider those arguments first before ruling
on the merits of the petition. See Steel Co. v. Citizens for a Better Env't, 523
U.S. 83, 94-95 (1998) (providing federal courts must resolve issues of subject
matter jurisdiction before considering merits of a lawsuit).
Accordingly, the validity of Member Becker's recess appointment is not a
matter we must address for jurisdictional reasons. It also is not an issue
presented to us in the initial briefing. Further, a circuit-split now exists. See
Noel Canning, 705 F.3d at 509. We find
Page 2642
that the D.C. Circuit has explored the relevant sources, leaving little for us to
add to the percolation of the issue other than to declare which side of the
split we take. Finally, as our analysis will reveal, answering this newly-raised
question would have only a marginal effect on this case. We leave the
constitutional issue for the Supreme Court. 5
5
In its supplemental brief, Horton urges that, in the event we enforce the

Board's order, we allow Horton to raise its constitutional challenges because

of extraordinary circumstances. Pursuant to 29 U.S.C. 160(e), [n]o
objection that has not been urged before the Board shall be considered by
the court, unless the failure or neglect to urge such objection shall be
excused because of extraordinary circumstances. In Horton's view, such
circumstances exist because if the Board's composition was unconstitutional,
it lacked the authority to act when it issued the order under review; further,
Noel Canning constitutes new authority that could not have been raised
before the Board. The Eight Circuit recently rejected similar arguments in
RELCO Locomotives. See 2013 WL 4420775, at *28-31. We follow that court's
reasoning here. Horton has not explained why it failed or neglected to raise
its constitutional challenge before the Board. The mere fact that Noel
Canning, a decision not binding on us, had not yet been decided is irrelevant
because all the legal arguments raised in that case were available to Horton
from the outset.
We turn to Horton's other challenges to the Board's decision.
B. Expiration of Board Member's Recess Appointment
[ 2 ] Horton contends that Member Becker's recess appointment expired
before the Board issued its decision, which left the Board without authority to
act because it lacked the necessary quorum of three members. 6 See 29
U.S.C. 153.
6
As mentioned, Member Haynes recused. Therefore, if Member Becker's
recess appointment had expired prior to the issuance of the Board's decision,
Chairman Pearce would be the only member voting in support of the decision.
The terms of those serving under recess appointments expire at the end of
the next Senate session after the appointment. U.S. Const. art. II, 2, cl. 3.
The President appointed Member Becker on March 27, 2010, during the
second session of the 111th Congress. Accordingly, if Member Becker was
validly appointed, his term expired at the end of the first session of the 112th
Congress.
Horton argues that the session ended when the Senate adjourned on
December 17, 2011 or, alternatively, when it held its last pro forma session
on December 30, 2011. Either date would mean that Member Becker's
appointment expired before the Board issued its decision on January 3, 2012.
A simple adjournment, though, does not end a session. The end of a session
is caused either by the affirmative act of the Senate's adjourning sine die 7 or
by the inactivity of no sine die vote prior to the commencement of the next
session: In the absence of a concurrent resolution, adjournment sine die is
determined by the arrival of the constitutionally mandated convening of the
new session on January 3. Henry B. Hogue, Congressional Research Service,
Recess Appointments: Frequently Asked Questions, pg. 2, n. 8 (June 7, 2013).
A new session begins at noon on January 3 of each year. See U.S. Const.,
amend. XX, 2. Because there was no sine die adjournment on an earlier
date, one Senate session ended on January 3, 2012, immediately before the
next session began at noon. See 158 Cong. Rec. S1 (daily ed. Jan. 3, 2012).
7
Sine die means without day. Black's Law Dictionary 1418 (8th ed. 2004).
An adjournment sine die ends a session without setting a time to
reconvene. Id. at 44.
Whether the Board's decision was entered prior to noon is unclear from the
record. This time-of-day question is supported by very little argument in the

briefing and no evidence in the record. If the order was effectively entered in
the afternoon after the next congressional session had begun, a new issue
would arise. Nonetheless, because of the state of the record and the briefing,
we consider the absence of proof about exactly when on January 3 the Board
acted to constitute a waiver of the issue.
We rely, to this limited extent only, on the de facto officer doctrine. The
Supreme Court has summarized the doctrine by saying it confers validity
upon acts performed by a person acting under the color of official title even
though it is later discovered that the legality of that person's appointment or
election to office is deficient. Ryder v. United States, 515 U.S. 177, 180
(1995). The Court reviewed some of its precedents on the Appointment
Clause and held that the de facto officer doctrine generally is inapplicable to
a timely constitutional challenge to the appointment of an officer:
We think that one who makes a timely challenge to the constitutional validity
of the
Page 2643
appointment of an officer who adjudicates his case is entitled to a decision on
the merits of the question and whatever relief may be appropriate if a
violation indeed occurred.
Id. at 182-83.
The timely challenge here was that Member Becker's appointment expired
long before January 3. We have resolved that issue. Absent more being made
of the contingencies that apply to January 3 itself, we conclude that no timely
challenge to that aspect of the appointment has been presented.
We do not imply a similar conclusion about the relevance of the de facto
officer doctrine to the more fundamental Appointments Clause issues
addressed in Noel Canning which we have concluded need not be addressed
today. We apply the doctrine here very much on the margins of the issue.
Those margins are an unraised, specific issue that after all the presentation
the parties desired to bring to the question, has no factual support nor
meaningful legal argument.
The Board issued its decision within Member Becker's recess term, and
Horton's argument that the Board lacked a quorum is without merit.
C. Delegation of Authority to Three-Member Panel
[ 3 ] Horton also argues that the Board lacked authority to issue its decision
because it had not been delegated authority to act as a three-member panel.
The Board is authorized to delegate to any group of three or more members
any or all of the powers which it may itself exercise. 29 U.S.C. 153(b). The
statute further states that three members of the Board shall, at all times,
constitute a quorum of the Board, except that two members shall constitute a
quorum of any group designated pursuant to [the delegation clause]. Id.
Under Section 153(b), four members of the Board can properly delegate
authority to a three-member panel, and two members of that panel may
decide a case if, for example, the third member had to recuse himself from a
particular matter. New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635, 2639 [188
LRRM 2833] (2010). In New Process Steel, the issue was whether a fourmember Board could delegate authority to three of its members, intending
that when two of its members recess appointments expired, the remaining
two members could carry on the Board's business. Id. at 2638. The Court held
that the statute required that the group consist of three members for the

duration of the delegation. Id. at 2640. It is clear, then, that the Board could
validly issue its decision through two of its members, provided that the Board
delegated authority to a three-member panel and that such a panel still
existed when the two members acted.
Though there is no other explicit statutory description of the mechanics of a
delegation, the Board quorum requirement and the three-member
delegation clause should not be read as easily surmounted technical
obstacles of little to no import. Id. at 2644. Horton argues that such a
delegation did not occur, as there is no order or other evidence of an express
delegation. No authority is cited explaining how the requisite delegation is to
be made. One amici, the Council on Labor Law Equality, identifies several
Board decisions that referred to a delegation of authority. For example, in one
case, issued on December 30, 2011four days before the panel issued the
order in this casethe panel's order stated that [p]ursuant to the provisions
of Section 3(b) of the [NLRA], as amended, the [Board] has delegated its
authority in this proceeding to a three-member panel. New Vista Nursing &
Rehab., LLC, Case 22-CA-29988, 2011 WL 6936391, at *1 (Dec. 30, 2011).
The New Vista order suggests that some other act caused the delegation, and
the later order recognized it.
Regardless of how a delegation of authority is achieved or recognized, no
party or amicus has provided authority that an express, written delegation is
required before a three-member panel may act. Despite the Supreme Court's
language in New Process Steel that delegation should not be treated as an
inconsequential technical matter, we will not establish for the first time that
an express order is required. There is no indication that the Board deviated
from its customary practice of delegating authority to the three-member
panel and allowing two members to decide the case when Member Hayes
recused. We conclude it is particularly inappropriate to require an express
delegation here because the Board only had three members. An express
delegation would have been by three members to themselves as three
members. We will infer that when the entire three-member Board decided to
act, it gave itself authority to act as three members.
Page 2644
On these facts, an express delegation would have been a semantical tying up
of loose ends, without significance.
It might well be a good practice that the Board not treat delegation as an
inconsequential technical matter and establish some practice for delegation.
Such a practice might avoid a contrary ruling one day by a court.
II. Pending Motions
[ 4 ] Another preliminary matter involves the composition of the record on
appeal. While its petition was pending, Horton moved that this court take
judicial notice of the arbitration demand Cuda submitted to the American
Arbitration Association and Cuda's letter to the Board's Regional Director,
seeking to withdraw his unfair labor practice charge. In the alternative,
Horton asked the court to supplement the record with the withdrawal letter.
The Board opposed Horton's motion, and moved to strike references to these
documents in Horton's brief and require Horton to file a corrected brief. This
court ordered these cross-motions carried with the case.
On April 8, 2008, Cuda, through his attorney, submitted an arbitration
demand as a single plaintiff, not as a member of a purported class. Cuda's

attorney later sent a letter to the Board's Regional Director, stating that he
would like to withdraw the charge filed against Horton . Horton's interest in
these documents stems from its belief that the Board's decision created the
novel presumption that an individual who files a class or collective action
complaint or arbitration demand necessarily seeks to initiate group action
with others. According to Horton , the Board's decision conflicts with the
procedural history of the case because Cuda's arbitration demand named
him as a single plaintiff and his withdrawal letter referred only to himself.
This court has generally declined to supplement the appellate record with
materials not presented to the district court, though [it has] the discretion to
do so. Bd. of Miss. Levee Comm'rs v. EPA, 674 F.3d 409, 417, n. 4 (5th Cir.
2012). It is undisputed that these documents were never before the Board, so
it is impossible to know what impact, if any, they would have had on the
Board's decision. Furthermore, Horton's argument that these documents
reveal some sort of inconsistency in the Board's decision, is factually
inaccurate. Although Cuda's arbitration demand referenced only himself, it
included a complaint that clearly described the parties as including all other
similarly situated employees. Therefore, it would be incorrect to say that, as
a matter of procedural history, Cuda acted individually, and not with the
intent to initiate a collective action. Furthermore, Horton makes no argument
that these documents would deprive this court of jurisdiction.
We decline to take judicial notice of these documents or supplement the
record. Because Horton's appellate brief contains only insignificant references
to these documents, we decline to order Horton to file a corrected brief as
requested by the Board.
III. NLRA Sections 7 & 8(a)(1) and the Federal Arbitration Act
The Board concluded that Horton violated Sections 7 and 8(a)(1) of the NLRA
by requiring its employees to sign the Mutual Arbitration Agreement, which
precludes them from filing joint, class, or collective claims addressing their
wages, hours or other working conditions against the employer in any forum,
arbitral or judicial. In reaching this conclusion, the Board first determined
that the agreement interfered with the exercise of employees substantive
rights under Section 7 of the NLRA, which allows employees to act in concert
with each other:
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, and shall also have
the right to refrain from any or all of such activities except to the extent that
such right may be affected by an agreement requiring membership in a labor
organization as a condition of employment as authorized in section 158(a)(3)
of this title.
29 U.S.C. 157 (emphasis added). The Board deemed it well-settled that the
NLRA protects the right of employees to improve their working conditions
through administrative and judicial forums.
Taking this view of Section 7, the Board held that the NLRA protects the right
of employees to join together to pursue workplace
Page 2645
grievances, including through litigation and arbitration. The Board concluded
that an individual who files a class or collective action regarding wages,

hours or working conditions, whether in court or before an arbitrator, seeks to

initiate or induce group action and is engaged in conduct protected by
Section 7 central to the [NLRA's] purposes. In the Board's opinion, by
requiring employees to refrain from collective or class claims, the Mutual
Arbitration Agreement infringed on the substantive rights protected by
Section 7.
The other statutory component of the Board's analysis is Section 8(a)(1) of
the NLRA. It defines unfair labor practices by an employer: It shall be an
unfair labor practice for an employer(1) to interfere with, restrain, or coerce
employees in the exercise of the rights guaranteed in section 157 of this
title. 29 U.S.C. 158(a). In light of the Board's interpretation of Section 7, it
held that Horton had committed an unfair labor practice under Section 8 by
requiring employees to agree not to act in concert in administrative and
judicial proceedings.
Horton and several amici disagree with this interpretation of Section 7.
According to Horton , the NLRA does not grant employees the substantive
right to adjudicate claims collectively. Additionally, Horton argues that the
Board's interpretation of Sections 7 and 8(a)(1) impermissibly conflicts with
the FAA by prohibiting the enforcement of an arbitration agreement.
We give to the Board judicial deference when it interprets an ambiguous
provision of a statute that it administers. Lechmere, Inc. v. NLRB, 502 U.S.
527, 536 [139 LRRM 2225] (1992). [T]he task of defining the scope of 7 is
for the Board to perform in the first instance as it considers the wide variety
of cases that come before it. NLRB v. City Disposal Sys., Inc., 465 U.S. 822,
829 [115 LRRM 3193] (1984) (quotation marks omitted). Where an issue
implicates its expertise in labor relations, a reasonable construction by the
Board is entitled to considerable deference. Id. Deference to the Board
cannot be allowed to slip into a judicial inertia which results in the
unauthorized assumption of major policy decisions properly made by
Congress. NLRB v. Fin. Inst. Emps. of Am., Local 1182, 475 U.S. 192, 202
[121 LRRM 2741] (1986) (alteration in original) (quoting Am. Ship Bldg. Co. v.
NLRB, 380 U.S. 300, 318 [58 LRRM 2672] (1965)). Particularly relevant to this
dispute is that the Board has not been commissioned to effectuate the
policies of the Labor Relations Act so single-mindedly that it may wholly
ignore other and equally important Congressional objectives. Southern S.S.
Co. v. NLRB, 316 U.S. 31, 47 [10 LRRM 544] (1942). Frequently the entire
scope of Congressional purpose calls for careful accommodation of one
statutory scheme to another, and it is not too much to demand of an
administrative body that it undertake this accommodation without excessive
emphasis upon its immediate task. Id. [W]e have accordingly never
deferred to the Board's remedial preferences where such preferences
potentially trench upon federal statutes and policies unrelated to the NLRA.
Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 144 [169 LRRM
2769] (2002).
Section 7 effectuated Congress's intent to equalize bargaining power
between employees and employers by allowing employees to band together
in confronting an employer regarding the terms and conditions of their
employment, and that [t]here is no indication that Congress intended to
limit this protection to situations in which an employee's activity and that of
his fellow employees combine with one another in any particular way. City

Disposal, 465 U.S. at 835. On the other hand, no court decision prior to the
Board's ruling under review today had held that the Section 7 right to engage
in concerted activities for the purpose of other mutual aid or protection
prohibited class action waivers in arbitration agreements.
Board precedent and some circuit courts have held that the provision protects
collective-suit filings. It is well settled that the filing of a civil action by
employees is protected activity [and] by joining together to file the lawsuit
[the employees] engaged in concerted activity. 127 Rest. Corp., 331 NLRB
269, 275-76 [170 LRRM 1447] (2000). [A] lawsuit filed in good faith by a
group of employees to achieve more favorable terms or conditions of
employment is concerted activity under Section 7 of the NLRA. Brady v.
Nat'l Football League, 644 F.3d 661, 673 [190 LRRM 3441] (8th Cir. 2011). An
employee's participation in a collective-bargaining agreement's grievance
procedure on behalf of himself and other employees
Page 2646
is similarly protected. City Disposal, 465 U.S. at 831-32, 835-36.
These cases under the NLRA give some support to the Board's analysis that
collective and class claims, whether in lawsuits or in arbitration, are protected
by Section 7. To stop here, though, is to make the NLRA the only relevant
authority. The Federal Arbitration Act (FAA) has equal importance in our
review. Caselaw under the FAA points us in a different direction than the
course taken by the Board. As an initial matter, arbitration has been deemed
not to deny a party any statutory right. See Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 627 (1985). Courts repeatedly have
rejected litigants attempts to assert a statutory right that cannot be
effectively vindicated through arbitration. 8 To be clear, the Board did not say
otherwise. It said the NLRA invalidates any bar to class arbitrations.
8
In every case the Supreme Court has considered involving a statutory right
that does not explicitly preclude arbitration, it has upheld the application of
the FAA. Walton v. Rose Mobile Homes LLC, 298 F.3d 470, 474 (5th Cir. 2002)
(citing cases); see also CompuCredit v. Greenwood, 132 S.Ct. 665, 673 (2012)
(considering in the context of the Credit Repair Organization Act)).
Although the Board is correct that none of those cases considered a Section 7
right to pursue legal claims concertedly, they nevertheless emphasize the
barrier any statute faces before it will displace the FAA. The Board presents
no cases that have overcome that barrier, and our research reveals very
limited exceptions. See In re Nat'l Gypsum Co., 118 F.3d 1056, 1069 (5th Cir.
1997) (finding exception to mandatory arbitration necessary to preserve
Bankruptcy Code's purpose of creating centralized and efficient bankruptcy
court system); Clary v. Helen of Troy, L.P., No. EP-11-CV-284-KC, 2011 WL
6960820, at *7 (W.D. Tex. Dec. 20, 2011) (finding inherent conflict between
Jury Act and FAA).
The use of class action procedures, though, is not a substantive right. See
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13 (1997); Deposit Guar.
Nat'l Bank v. Roper, 445 U.S. 326, 332 (1980) ([T]he right of a litigant to
employ Rule 23 is a procedural right only, ancillary to the litigation of
substantive claims.). This court similarly has characterized a class action as
a procedural device. Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643 (5th
Cir. 2012), abrogated on other grounds by Oxford Health Plans LLC v. Sutter,
133 S.Ct. 2064 (2013) (quoting Blaz v. Belfer, 368 F.3d 501, 505 (5th Cir.

2004)). Thus, while a class action may lead to certain types of remedies or
relief, a class action is not itself a remedy. Id. The Board distinguished such
caselaw on the basis that the NLRA is essentially sui generis. That act's
fundamental precept is the right for employees to act collectively. Thus, Rule
23 is not the source of the right to the relevant collective actions. The NLRA
is.
Even so, there are numerous decisions holding that there is no right to use
class procedures under various employment-related statutory frameworks.
For example, the Supreme Court has determined that there is no substantive
right to class procedures under the Age Discrimination in Employment Act, 29
U.S.C. 621 et seq. (ADEA), despite the statute providing for class
procedures. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 [55 FEP
Cases 1116] (1991). Similarly, numerous courts have held that there is no
substantive right to proceed collectively under the FLSA, the statute under
which Cuda originally brought suit. Carter v. Countrywide Credit Indus., Inc.,
362 F.3d 294, 298 [9 WH Cases2d 705] (5th Cir. 2004); see also Adkins v.
Labor Ready, Inc., 303 F.3d 496, 506 [8 WH Cases2d 7] (4th Cir. 2002);
Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 [3 WH Cases2d 481] (9th Cir.
1996).
The Board determined that invalidating restrictions on class or collective
actions would not conflict with the FAA. The Board reached this conclusion by
first observing that when private contracts interfere with the functions of the
NLRA, the NLRA prevails. The Board then noted that the FAA was intended to
prevent courts from treating arbitration agreements less favorably than other
private contracts, but the FAA allows for the non-enforcement of arbitration
agreements on any grounds as exist at law or in equity for the revocation of
any contract. 9 U.S.C. 2. It then reasoned that [t]o find that an arbitration
agreement must yield to the NLRA is to treat it no worse than any other
private contract that conflicts with Federal labor law. The Board argues that
any employee-employer contract prohibiting collective action fails under
Section 7, and arbitration agreements are treated no worse and no better.
In so finding, the Board relied in part on its view that the policy behind the
NLRA trumped the different policy considerations in the FAA that supported
enforcement of arbitration
Page 2647
agreements. The Board considered its holding to be a limited one, remarking
that the only agreements affected by its decision were those between
employers and employees. The Board recognized that a party may not be
compelled under the FAA to submit to class arbitration unless there is a
contractual basis for concluding that the party agreed to do so. Stolt-Nielsen
S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 684 (2010). Even so, the Board
concluded that it was not requiring parties to engage in class arbitration: So
long as the employer leaves open a judicial forum for class and collective
claims, employees NLRA rights are preserved without requiring the
availability of class-wide arbitration, and [e]mployers remain[ed] free to
insist that arbitral proceedings be conducted on an individual basis.
The Board explained its interpretation of the NLRA as appropriately weighing
the public policy interests involved and, to the extent the NLRA and FAA
might conflict, suitably accommodating those statutes interests. Had it found
the two enactments to conflict, the Board believed the FAA would have to

yield for also being in conflict with the Norris-LaGuardia Act of 1932, which
prohibits agreements that prevent aiding by lawful means a person
participating in a lawsuit arising out of a labor dispute, and which was passed
seven years after the FAA.
We now evaluate the Board's reasoning. We start with the requirement under
the FAA that arbitration agreements must be enforced according to their
terms. CompuCredit, 132 S.Ct. at 669. Two exceptions to this rule are at issue
here: (1) an arbitration agreement may be invalidated on any ground that
would invalidate a contract under the FAA's saving clause, AT&T Mobility
LLC v. Concepcion, 131 S.Ct. 1740, 1746 (2011); and (2) application of the
FAA may be precluded by another statute's contrary congressional command,
CompuCredit, 132 S. Ct. at 669.
The Board clearly relied on the FAA's saving clause. Less clear is whether the
Board also asserted that a contrary congressional command is present. We
consider each exception.
[ 5 ] The first exception to enforcing arbitration agreements is set out in this
language found in the FAA, which we will refer to as the saving clause:
A written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction shall be 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 (emphasis added).
The Board found that the Mutual Arbitration Agreement violated the collective
action provisions of the NLRA, making the saving clause applicable. A detailed
analysis of Concepcion leads to the conclusion that the Board's rule does not
fit within the FAA's saving clause. A California statute prohibited class action
waivers in arbitration agreements. Concepcion, 131 S.Ct. at 1746, 1753. The
Court considered whether the fact that California's prohibition on class-action
waivers applied in both judicial and arbitral proceedings meant the
prohibition fell within the FAA's saving clause. Id. at 1746. The Court said the
saving clause was inapplicable. The overarching purpose of the FAA is to
ensure the enforcement of arbitration agreements according to their terms so
as to facilitate streamlined proceedings, and [r]equiring the availability of
classwide arbitration interferes with fundamental attributes of arbitration and
thus creates a scheme inconsistent with the FAA. Id. at 1748. The Court
found numerous differences between class arbitration and traditional
arbitration. These included that the switch from bilateral to class arbitration
sacrifices the principal advantage of arbitrationits informalityand makes
the process slower, more costly, and more likely to generate procedural
morass than final judgment. Id. at 1751. Class arbitration also requires
procedural formality because [i]f procedures are too informal, absent class
members would not be bound by the arbitration. Id. Finally, class arbitration
greatly increases risks to defendants by removing multilayered review,
resulting in defendants, who might have been willing to accept such risks in
individual arbitrations as the cost of doing business, being pressured into
settling questionable claims. Id. at 1752. Taken together, the effect of
requiring the availability of class procedures was to give companies less
incentive to resolve claims on an individual basis. Id. at 1750.
Page 2648

Like the statute in Concepcion, the Board's interpretation prohibits classaction waivers. While the Board's interpretation is facially neutralrequiring
only that employees have access to collective procedures in an arbitral or
judicial forumthe effect of this interpretation is to disfavor arbitration. As
the Concepcion Court remarked, there is little incentive for lawyers to
arbitrate on behalf of individuals when they may do so for a class and reap
far higher fees in the process. And faced with inevitable class arbitration,
companies would have less incentive to continue resolving potentially
duplicative claims on an individual basis. Id.
It is no defense to say there would not be any class arbitration because
employees could only seek class relief in court. Regardless of whether
employees resorted to class procedures in an arbitral or in a judicial forum,
employers would be discouraged from using individual arbitration. Further, as
Concepcion makes clear, certain procedures are a practical necessity in class
arbitration. Id. at 1751 (listing adequate representation of absent class
members, notice, opportunity to be heard, and right to opt-out). Those
procedures are also part of class actions in court. As Concepcion held as to
classwide arbitration, requiring the availability of class actions interferes
with fundamental attributes of arbitration and thus creates a scheme
inconsistent with the FAA. Id. at 1748. Requiring a class mechanism is an
actual impediment to arbitration and violates the FAA. The saving clause is
not a basis for invalidating the waiver of class procedures in the arbitration
agreement.
[ 6 ] We examine next whether the NLRA contains a congressional command
to override the FAA. The FAA establishes a liberal federal policy favoring
arbitration agreements. Id. at 1749. The FAA's purpose is to ensure the
enforcement of arbitrations agreements according to their terms. Id. at
1748. That is the case even when the claims at issue are federal statutory
claims, unless the FAA's mandate has been overridden by a contrary
congressional command. CompuCredit, 132 S.Ct. at 669 (quoting
Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226 (1987)). If
such a command exists, it will be discoverable in the text, the statute's
legislative history, or an inherent conflict between arbitration and the
[statute's] underlying purposes. Gilmer, 500 U.S. at 26. [T]he relevant
inquiry [remains] whether Congress precluded arbitration or other
nonjudicial resolution of claims. Garrett v. Circuit City Stores, Inc., 449 F.3d
672, 679 [179 LRRM 2780] (5th Cir. 2006) (quoting Gilmer, 500 U.S. at 28).
When considering whether a contrary congressional command is present,
courts must remember that questions of arbitrability must be addressed
with a healthy regard for the federal policy favoring arbitration. Gilmer, 500
U.S. at 26 (quotation marks and citation omitted). The party opposing
arbitration bears the burden of showing whether a congressional command
exists. Id. Any doubts are resolved in favor of arbitration. Moses H. Cone
Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983).
There is no argument that the NLRA's text contains explicit language of a
congressional intent to override the FAA. Instead, it is the general thrust of
the NLRAhow it operates, its goal of equalizing bargaining powerfrom
which the command potentially is found. For example, one of the NLRA's
purposes is to protect [] the exercise by workers of full freedom of
association for the purpose of negotiating the terms and conditions of their

employment or other mutual aid or protection. 29 U.S.C. 151. Such general

language is an insufficient congressional command, as much more explicit
language has been rejected in the past. Indeed, the text does not even
mention arbitration. By comparison, statutory references to causes of action,
filings in court, or allowing suits all have been found insufficient to infer a
congressional command against application of the FAA. See CompuCredit,
132 S.Ct. at 670-71. Even explicit procedures for collective actions will not
override the FAA. See Gilmer, 500 U.S. at 32 (ADEA); Carter, 362 F.3d at 298
(FLSA). The NLRA does not explicitly provide for such a collective action,
much less the procedures such an action would employ. 9 29 U.S.C. 157.
Thus, there is no basis on which to find that the text
Page 2649
of the NLRA supports a congressional command to override the FAA.
9
Also relevant is that there is no private cause of action against employers to
prevent and remedy unfair labor practices under the NLRA; enforcement is
left, instead, to the Board. See Hobbs v. Hawkins, 968 F.2d 471, 478-79 [141
LRRM 2026] (5th Cir. 1992). Accordingly, outside of the Board taking action,
there would be no conflict between, for example, an employee's FLSA claim
and the FAA.
We next look for evidence in legislative history of a disavowal of arbitration.
We find none. As amicus Chamber of Commerce observes, the legislative
history of the NLRA, and its predecessor, the National Industrial Recovery Act
of 1933, only supports a congressional intent to level the playing field
between workers and employers by empowering unions to engage in
collective bargaining. The Chamber of Commerce draws attention to the fact
that Congress did not discuss the right to file class or consolidated claims
against employers, although such a discussion would admittedly have
occurred prior to the existence of Rule 23 or the FLSA. Therefore, the
legislative history also does not provide a basis for a congressional command
to override the FAA.
Neither the NLRA's statutory text nor its legislative history contains a
congressional command against application of the FAA. Therefore, the Mutual
Arbitration Agreement should be enforced according to its terms unless a
contrary congressional command can be inferred from an inherent conflict
between the FAA and the NLRA's purpose. See Gilmer, 500 U.S. at 26. As
explained below, we do not find such a conflict.
First, courts repeatedly have understood the NLRA to permit and require
arbitration. See 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 257-58 [186 LRRM
2065] (2009) (finding that a collective-bargaining agreement's arbitration
provision must be honored unless ADEA removes such claims from NLRA's
scope); Blessing v. Freestone, 520 U.S. 329, 343 (1997) ([W]e discern [] in
the structure of the [NLRA] the very specific right of employees to complete
the collective-bargaining process and agree to an arbitration clause.
(internal quotation marks and citation omitted)); Richmond Tank Car Co. v.
NLRB, 721 F.2d 499, 501 [115 LRRM 2165] (5th Cir. 1983) (holding that
NLRA's policy favors arbitration of labor disputes). As the Board itself
acknowledged, arbitration has become a central pillar of Federal labor
relations policy and in many different contexts the Board defers to the
arbitration process both before and after the arbitrator issues an award.
Having worked in tandem with arbitration agreements in the past, the NLRA

has no inherent conflict with the FAA.

Second, there are conceptual problems with finding the NLRA in conflict with
the FAA. We know that the right to proceed collectively cannot protect
vindication of employees statutory rights under the ADEA or FLSA because a
substantive right to proceed collectively has been foreclosed by prior
decisions. See Gilmer, 500 U.S. at 32 (ADEA); Carter, 362 F.3d at 298 (FLSA).
The right to collective action also cannot be successfully defended on the
policy ground that it provides employees with greater bargaining power.
Mere inequality in bargaining power is not a sufficient reason to hold that
arbitration agreements are never enforceable in the employment context.
Gilmer, 500 U.S. at 33. The end result is that the Board's decision creates
either a right that is hollow or one premised on an already-rejected
justification.
We find no clear answer to the validity of the Board's use of the NLRA and
FAA's respective enactment dates. Where statutes irreconcilably conflict, the
statute later in time will prevail. See Chi. & N. W. Ry. Co. v. United Transp.
Union, 402 U.S. 570, 582, n. 18 [77 LRRM 2337] (1971); see also Lockhart v.
United States, 546 U.S. 142, 148 (2005) (Scalia, J., concurring). The Board
determined that the NLRA was the later statute. The FAA was enacted in
1925, then reenacted on July 30, 1947. The NLRA was enacted on July 5,
1935, and reenacted on June 23, 1947. The reenactments were part of a
recodification of federal statutes that apparently made no substantive
changes. An Act to codify and enact into positive law, Title 9 of the United
States Code, entitled Arbitration, Pub. L. No. 80-282, 61 Stat. 669 (1947).
The relevance of the date of enactment is whether a repeal by implication
arises. S. Scrap Material Co., LLC., v. ABC Ins. Co. (In re Southern Scrap
Materials Co., LLC.), 541 F.3d 584, 593, n. 14 (5th Cir. 2008). The implication
is based on the assumption that Congress is fully aware of prior enactments
as it adopts new laws. Id. It is unclear whether that assumption has the same
force for a recodification.
Of some importance is that the NLRA was enacted and reenacted prior to the
advent in 1966 of modern class action practice. See Ortiz v. Fibreboard Corp.,
527 U.S. 815, 832-33 (1999). We find limited force to the argument that there
is an inherent conflict between the FAA and NLRA when the NLRA would have
to be protecting a right of access to a procedure
Page 2650
that did not exist when the NLRA was (re)enacted. 10 The dates of enactment
have no impact on our decision.
10
The Board also relied on the Norris-LaGuardia Act (NLGA) to support its
view that the FAA must give way to the NLRA. It is undisputed that the NLGA
is outside the Board's interpretive ambit. See Lechmere, 502 U.S. at 536. We
also conclude that the Board's reasoning drawn from the NLGA is
unpersuasive.
The NLRA should not be understood to contain a congressional command
overriding application of the FAA. The burden is with the party opposing
arbitration, Gilmer, 500 U.S. at 26, and here the Board has not shown that the
NLRA's language, legislative history, or purpose support finding the necessary
congressional command. Because the Board's interpretation does not fall
within the FAA's saving clause, and because the NLRA does not contain a
congressional command exempting the statute from application of the FAA,

the Mutual Arbitration Agreement must be enforced according to its terms.

We do not deny the force of the Board's efforts to distinguish the NLRA from
all other statutes that have been found to give way to requirements of
arbitration. The issue here is narrow: do the rights of collective action
embodied in this labor statute make it distinguishable from cases which hold
that arbitration must be individual arbitration? See Concepcion, 131 S.Ct. at
1750-53. We have explained the general reasoning that indicates the answer
is no. We add that we are loath to create a circuit split. Every one of our
sister circuits to consider the issue has either suggested or expressly stated
that they would not defer to the NLRB's rationale, and held arbitration
agreements containing class waivers enforceable. See Richards v. Ernst &
Young, LLP, __ F.3d __, No. 11-17530, 2013 WL 4437601, at *2 [21 WH
Cases2d 21] (9th Cir. Aug. 21, 2013); Sutherland v. Ernst & Young LLP, 726
F.3d 290, 297-98, n. 8 [20 WH Cases2d 1866] (2d Cir. 2013); Owen v. Bristol
Care, Inc., 702 F.3d 1050, 1055 [20 WH Cases2d 24] (8th Cir. 2013). 11
11
A thorough explanation of the strongest arguments in favor of the Board's
decision, which embraces the Board's distinctions from earlier Supreme Court
pronouncements on arbitrations and adding some of its own, appears in a
recent law review article. Charles A. Sullivan & Timothy P. Glynn, Horton
Hatches the Egg: Concerted Action Includes Concerted Dispute Resolution, 64
Ala. L. Rev. 1013 (2013). We do not adopt its reasoning but note our
consideration of its advocacy.
IV. Mutual Arbitration Agreement's Violation of NLRA Section 8(a)(1)
[ 7 ] The ALJ found that the Mutual Arbitration Agreement violated Section
8(a)(1) and (4) for including language that would lead employees to a
reasonable belief that they were prohibited from filing unfair labor practice
charges. The ALJ reached this conclusion by analyzing the Board's decisions
in Bill's Electric, Inc., 350 NLRB 292 [182 LRRM 1210] (2007) and U-Haul Co.
of California, 347 NLRB 375 [180 LRRM 1093] (2006), enforced, 255 F.App'x
527 [184 LRRM 2256] (D.C. Cir. 2007), both of which found broad and
ambiguous judicial waivers unlawful. The Board affirmed the ALJ's Section
8(a)(1) holding on the same grounds. 12 The Board also relied on language in
the agreement that all disputes would be resolved by arbitration, without
listing any exception for unfair labor practice charges, and that employees
waived the right to file a lawsuit or other civil proceeding.
12
Because the Board affirmed the ALJ's holding under Section 8(a)(1), it did
not reach Section 8(a)(4).
The arbitration agreement would violate the NLRA if it prohibited employees
from filing unfair labor practice claims with the Board. Even in the absence
of express language prohibiting section 7 activity, a company nonetheless
violates section 8(a)(1) if employees would reasonably construe the
language to prohibit section 7 activity. Cintas Corp. v. NLRB, 482 F.3d 463,
467 [181 LRRM 2615] (D.C. Cir. 2007) (citation omitted).
The agreement clearly provides that employees agree to arbitrate without
limitation[:] claims for discrimination or harassment; wages, benefits, or other
compensation; breach of any express or implied contract; [and] violation of
public policy. It also provides for four exceptions to arbitrations. None of
these exclusions refer to unfair labor practice claims.
Horton emphasizes that the agreement refers to court actions and rights
to trial in court before a judge or jury, implying that administrative

proceedings before the Board are unaffected. The agreement gives different
indications too, as it provides that an arbitrator will not have the authority to
order any remedy that a court or agency would not be authorized to order.
(emphasis added). The agreement also states that each party shall pay
Page 2651
costs that each party would incur if the claim(s) were litigated in a court or
agency and that [t]he arbitrator may award reasonable fees and costs to
the prevailing party to the same extent a court or agency would be entitled to
do. (emphases added).
Most importantly, the Mutual Arbitration Agreement concludes with an
employee's acknowledgment that he or she knowingly and voluntarily
waiv[es] the right to file a lawsuit or other civil proceeding relating to
Employee's employment with [ Horton ] as well as the right to resolve
employment-related disputes in a proceeding before a judge or jury.
(emphases added). The reasonable impression could be created that an
employee is waiving not just his trial rights, but his administrative rights as
well.
The ALJ and the Board cite some Board precedents that assist in our analysis.
In one, the employer changed an application form to include a requirement
that applicants resolve through grievance and arbitration procedures any
legal claims in connection with [the applicant's] rights under Federal or
State law. Bill's Electric, 350 NLRB at 295-96 (omission in original). An
accompanying alternate dispute resolution form was entitled Arbitration to
be Exclusive Procedure for Resolution of All Disputes. Id. at 296. While that
form also stated that it did not constitute a waiver of an employee's right to
file a charge with the Board, this was not enough to save it: At the very least,
the mandatory grievance and arbitration policy would reasonably be read by
affected applicants and employees as substantially restricting, if not totally
prohibiting, their access to the Board's processes. Id.
Another Board decision invalidated an arbitration agreement that provided for
arbitration of any other legal or equitable claims and causes of action
recognized by local, state, or federal law or regulations. U-Haul, 347 NLRB at
377. The Board recognize[d] that the language in the arbitration policy [did]
not explicitly restrict employees from resorting to the Board's remedial
procedures but that the breadth of the policy language would result in
employees reasonably constru[ing] the remedies for violations of the [NLRA]
as included among the legal claims covered by the policy. Id. The panel
rejected the argument that the phrase court of law cured the agreement's
deficiencies because decisions by the Board could always be appealed to a
United States court of appeals. Id. at 377-78.
As in U-Haul, the Mutual Arbitration Agreement refers to court, judge, and
jury, but these references are insufficient to counter the breadth of the
waiver created by the phrase right to file a lawsuit or other civil proceeding.
Further, as in Bill's Electric, the agreement's use of seemingly incompatible
language that refers to court actions in one sentence and agency actions in
another, means an employee would reasonably read the agreement as also
precluding unfair labor practice charges. Horton distinguishes Bill's Electric
and U-Haul as occurring in the context of union activity, but neither opinion's
reasoning was premised on such activity. The Board's finding that the Mutual
Arbitration Agreement could be misconstrued was reasonable and the need

for Horton to take the ordered corrective action was valid.

IV. Conclusion
All outstanding motions are DENIED. Horton's petition for review of the
Board's decision invalidating the Mutual Arbitration Agreement's waiver of
class procedures is GRANTED. The Board's order that Section 8(a)(1) has
been violated because an employee would reasonably interpret the Mutual
Arbitration Agreement as prohibiting the filing of a claim with the Board, is
ENFORCED.
Concurring/Dissenting Opinion Text
Concurrence/Dissent By:
GRAVES, Circuit Judge, concurring in part and dissenting in part.
Because I would deny the petition for review, thus affirming the Board's
decision in toto, I respectfully concur in part and dissent in part. Specifically, I
disagree with the majority's finding that the Board's interpretation of sections
7 & 8(a)(1) of the National Labor Relations Act (NLRA) conflict with the
Federal Arbitration Act (FAA). The Mutual Arbitration Agreement (MAA)
precludes employees from filing joint, class or collective claims in any forum.
I agree with the Board that the MAA interferes with the exercise of
employees substantive rights under Section 7 of the NLRA, which provides, in
relevant part, that employees have the right to engage in other concerted
activities for the purpose of collective
Page 2652
bargaining or other mutual aid or protection. 29 U.S.C. 157.
Further, as the Board specifically found, holding that the MAA violates the
NLRA does not conflict with the FAA for several reasons: (1) the purpose of
the FAA was to prevent courts from treating arbitration agreements less
favorably than other private contracts. In re D.R . Horton , Inc., 357 NLRB No.
184, *11 [192 LRRM 1137] (2012). To find that an arbitration agreement
must yield to the NLRA is to treat it no worse than any other private contract
that conflicts with Federal labor law. Id.; (2) the Supreme Court's
jurisprudence under the FAA, permitting enforcement of agreements to
arbitrate federal statutory claims, including employment claims, makes clear
that the agreement may not require a party to forgo the substantive rights
afforded by the statute. Id. at *12. The right to engage in collective action
including collective legal actionis the core substantive right protected by
the NLRA and is the foundation on which the Act and Federal labor policy
rest. Id. (emphasis original); (3) nothing in the text of the FAA suggests that
an arbitration agreement that is inconsistent with the NLRA is nevertheless
enforceable. Id. at *14. To the contrary, Section 2 of the FAA provides
that arbitration agreements may be invalidated in whole or in part upon any
grounds as exist at law or in equity for the revocation of any contract. Id.;
and (4) even if there were a direct conflict between the NLRA and the FAA,
there are strong indications that the FAA would have to yield under the terms
of the Norris-LaGuardia Act. Id. at *16.
I also agree with the Board's holding that Horton violated Section 8(a)(1) by
requiring employees to waive their right to collectively pursue employmentrelated claims in all forums, arbitral and judicial. Id. at *17. The Board made
it clear that it was not mandating class arbitration in order to protect
employees rights under the NLRA, but rather was holding that employers

may not compel employees to waive their NLRA right to collectively pursue
litigation of employment claims in all forums, judicial and arbitral.
As acknowledged by the majority, we give the Board judicial deference in
interpreting an ambiguous provision of a statute that it administers.
Lechmere, Inc. v. NLRB, 502 U.S. 527, 536 [139 LRRM 2225] (1992). Further,
as acknowledged by the majority, there is authority to support the Board's
analysis.
For the reasons set out herein, I would deny the petition for review and affirm
the Board's decision in toto. Therefore, I respectfully concur in part and
dissent in part.
- End of Case 204 LRRM 3489
Murphy Oil USA , Inc . v . NLRB
U.S. Court of Appeals,
Fifth Circuit
No. 14-60800
October 26, 2015
2015 BL 351672
808 F.3d 1013
MURPHY OIL USA , INCORPORATED, Petitioner/Cross-Respondent v .
NATIONAL LABOR RELATIONS BOARD, Respondent/Cross-Petitioner
Headnotes
INTERFERENCE
[1] Mandatory arbitration agreement 50.06 50.45 94.23 94.25
NLRB did not err in finding that employer violated federal labor law when it
required employees to sign arbitration agreement that waived their right to
pursue class or collective actions in any forum, even though court does not
hold that express statement must be made indicating employee's right to file
NLRB charges remains intact, where such statement would assist if
incompatible or confusing language appears in agreement, agreement
provided that any and all claims that relate to employment must be resolved
by individual arbitration, and broad language can create reasonable
impression that employee is waiving both administrative and trial rights.
[2] Revised arbitration agreement Class-action waiver 50.06
50.45 94.23 94.25
NLRB erred in finding that employer violated federal labor law when it
required employees hired after March 2012 to sign revised arbitration
agreement that waived their right to pursue class or collective actions, which
added statement that nothing in it precludes employees from participating in
proceedings to adjudicate unfair-labor-practice charges before board, despite
contention that revised agreement could be interpreted as prohibiting
employees from pursuing administrative remedies that could be construed as
having commenced as class action, where agreement says opposite, and it
would be unreasonable for employee to construe agreement as prohibiting
filing of charges with board.
[3] Mandatory arbitration agreement Enforcement Right to
litigate 50.06 50.45 71.01
NLRB erred in finding that employer unlawfully enforced its mandatory
arbitration agreement through motions to dismiss Fair Labor Standards Act

collective action in federal district court and to compel employees to arbitrate

their claims individually, despite contention that agreement would chill
employees' Section 7 rights and that employer acted with illegal objective in
seeking to enforce it, where employer filed motion more than year and a half
before board had even spoken on lawfulness of such agreements, and Second
Circuit later held that such agreements were generally lawful.
Case History and Disposition
Petition for review and cross-application for enforcement of an NLRB order
(361 NLRB No. 72, 10-CA-038804, 201 LRRM 1385). Petition denied;
enforcement granted.
Attorneys
Jeffrey A. Schwartz (Jackson Lewis, P.C.), Atlanta, Ga., and Daniel D. Schudroff
(Jackson Lewis, P.C.), New York, N.Y., for petitioner.
Kira Dellinger Vol (Richard F. Griffin, General Counsel, Jennifer Abruzzo,
Deputy General Counsel, John H. Ferguson, Associate General Counsel, Linda
Dreeben, Deputy Associate General Counsel, and Jeffrey W. Burritt, on brief),
Washington, D.C., for respondent.
Richard Paul Rouco and Glen M. Connor (Quinn, Connor, Weaver, Davies &
Roucco), Birmingham, Ala., for intervenor Sheila Hobson.
Hal K. Gillespie (Gillespie Sanford, L.L.P.), Dallas, Tex., on brief for Labor Law
Scholars as amicus curiae in support of respondent.
Judge
Before: JONES, SMITH, and SOUTHWICK, Circuit Judges.
Opinion Text
Opinion By:
SOUTHWICK, Circuit Judge.
The National Labor Relations Board concluded that Murphy Oil USA, Inc .,
had unlawfully required employees at its Alabama facility to sign an
arbitration agreement waiving their right to pursue class and collective
actions. Murphy Oil , aware that this circuit had already held to the contrary,
used the broad venue rights governing the review of Board orders to file its
petition with this circuit. The Board, also aware, moved for en banc review in
order to allow arguments that the prior decision should be overturned. Having
failed in that motion and having the case instead heard by a three-judge
panel, the Board will not be surprised that we adhere, as we must, to our
Page 3490
prior ruling. We GRANT Murphy Oil's petition, and hold that the corporation
did not commit unfair labor practices by requiring employees to sign its
arbitration agreement or seeking to enforce that agreement in federal district
court.
We DENY Murphy Oil's petition insofar as the Board's order directed the
corporation to clarify language in its arbitration agreement applicable to
employees hired prior to March 2012 to ensure they understand they are not
barred from filing charges with the Board.
FACTS AND PROCEDURAL BACKGROUND
Murphy Oil USA, Inc ., operates retail gas stations in several states. Sheila
Hobson, the charging party, began working for Murphy Oil at its Calera,
Alabama facility in November 2008. She signed a Binding Arbitration
Agreement and Waiver of Jury Trial (the Arbitration Agreement). The
Arbitration Agreement provides that, [e]xcluding claims which must, by

law, be resolved in other forums, [ Murphy Oil ] and Individual agree to

resolve any and all disputes or claims which relate to Individual's
employment by binding arbitration. The Arbitration Agreement further
requires employees to waive the right to pursue class or collective claims in
an arbitral or judicial forum.
In June 2010, Hobson and three other employees filed a collective action
against Murphy Oil in the United States District Court for the Northern
District of Alabama alleging violations of the Fair Labor Standards Act
(FLSA). Murphy Oil moved to dismiss the collective action and compel
individual arbitration pursuant to the Arbitration Agreement. The employees
opposed the motion, contending that the FLSA prevented enforcement of the
Arbitration Agreement because that statute grants a substantive right to
collective action that cannot be waived. The employees also argued that the
Arbitration Agreement interfered with their right under the National Labor
Relations Act (NLRA) to engage in Section 7 protected concerted activity.
While Murphy Oil's motion to dismiss was pending, Hobson filed an unfair
labor charge with the Board in January 2011 based on the claim that the
Arbitration Agreement interfered with her Section 7 rights under the NLRA.
The General Counsel for the Board issued a complaint and notice of hearing
to Murphy Oil in March 2011.
In a separate case of first impression, the Board held in January 2012 that an
employer violates Section 8(a)(1) of the NLRA by requiring employees to sign
an arbitration agreement waiving their right to pursue class and collective
claims in all forums. D.R. Horton, Inc ., 357 NLRB No. 184 [192 LRRM 1137]
(2012). The Board concluded that such agreements restrict employees
Section 7 right to engage in protected concerted activity in violation of
Section 8(a)(1). Id. The Board also held that employees could reasonably
construe the language in the D. R. Horton arbitration agreement to preclude
employees from filing an unfair labor practice charge, which also violates
Section 8(a)(1). Id. at *2, 18.
Following the Board's decision in D.R. Horton, Murphy Oil implemented a
Revised Arbitration Agreement for all employees hired after March 2012.
The revision provided that employees were not barred from participating in
proceedings to adjudicate unfair labor practice[ ] charges before the Board.
Because Hobson and the other employees involved in the Alabama lawsuit
were hired before March 2012, the revision did not apply to them.
In September 2012, the Alabama district court stayed the FLSA collective
action and compelled the employees to submit their claims to arbitration
pursuant to the Arbitration Agreement. 1 One month later, the General
Counsel amended the complaint before the Board stemming from Hobson's
charge to allege that Murphy Oil's motion to dismiss and compel arbitration
in the Alabama lawsuit violated Section 8(a)(1) of the NLRA.
1
The employees never submitted their claims to arbitration. In February
2015 , the employees moved for reconsideration of the Alabama district
court's order compelling arbitration. The district court denied their motion
and ordered the employees to show cause why their case should not be
dismissed with prejudice for failing to adhere to the court's order compelling
arbitration. The district court ultimately dismissed the case with prejudice for
willful disregard of its instructions in order to gain [a] strategic
advantage. Hobson v. Murphy Oil USA , Inc ., No. CV-10-S-1486-S, 2015 WL

4111661, at *3 (N.D. Ala. July 8, 2015 ), appeal docketed, No. 15-13507 (11th
Cir . Aug. 5, 2015 ). The employees timely appealed. The case is pending
before the Eleventh Circuit.
Meanwhile, the petition for review of the Board's decision in D.R. Horton was
making its way to this court. In December 2013, we rejected the Board's
analysis of arbitration agreements. D.R. Horton, Inc . v. NLRB , 737 F.3d 344
[197 LRRM 2637] ( 5th Cir . 2013). We held: (1) the NLRA does not contain a
congressional command overriding the
Page 3491
Federal Arbitration Act (FAA); 2 and (2) use of class action procedures is
not a substantive right under Section 7 of the NLRA. Id. at 357, 360-62. This
holding means an employer does not engage in unfair labor practices by
maintaining and enforcing an arbitration agreement prohibiting employee
class or collective actions and requiring employment-related claims to be
resolved through individual arbitration. Id. at 362.
2
9 U.S.C. 1 et seq.
In analyzing the specific arbitration agreement at issue in D.R. Horton,
however, we held that its language could be misconstrued as prohibiting
employees from filing an unfair labor practice charge, which would violate
Section 8(a)(1). Id. at 364. We enforced the Board's order requiring the
employer to clarify the agreement. Id. The Board petitioned for rehearing en
banc, which was denied without a poll in April 2014.
The Board's decision as to Murphy Oil was issued in October 2014, ten
months after our initial D.R. Horton decision and six months after rehearing
was denied. The Board, unpersuaded by our analysis, reaffirmed its D.R.
Horton decision. It held that Murphy Oil violated Section 8(a)(1) by requiring
its employees to agree to resolve all employment-related claims through
individual arbitration, and by taking steps to enforce the unlawful agreements
in [f]ederal district court. The Board also held that both the Arbitration
Agreement and Revised Arbitration Agreement were unlawful because
employees would reasonably construe them to prohibit filing Board charges.
The Board ordered numerous remedies. Murphy Oil was required to rescind
or revise the Arbitration and Revised Arbitration agreements, send
notification of the rescission or revision to signatories and to the Alabama
district court, post a notice regarding the violation at its facilities, reimburse
the employees attorneys fees incurred in opposing the company's motion to
dismiss and compel arbitration in the Alabama litigation, and file a sworn
declaration outlining the steps it had taken to comply with the Board order.
Murphy Oil timely petitioned this court for review of the Board decision.
DISCUSSION
Board decisions that are reasonable and supported by substantial evidence
on the record considered as a whole are upheld. Strand Theatre of
Shreveport Corp. v. NLRB , 493 F.3d 515, 518 [182 LRRM 2324] ( 5th Cir .
2007) (citation and quotation marks omitted); see also 29 U.S.C. 160(e).
Substantial evidence is such relevant evidence as a reasonable mind would
accept to support a conclusion. J. Vallery Elec., Inc . v. NLRB , 337 F.3d 446,
450 [172 LRRM 2929] ( 5th Cir . 2003) (citation and quotation marks omitted).
This court reviews the Board's legal conclusions de novo, but [w]e will
enforce the Board's order if its construction of the statute is reasonably
defensible. Strand Theatre, 493 F.3d at 518 (citation and quotation marks

omitted).
I. Statute of Limitations and Collateral Estoppel
Murphy Oil asserts that Hobson filed her charge too late after the execution
of the Arbitration Agreement and the submission of Murphy Oil's motion to
compel in the Alabama litigation. By statute, no complaint shall issue based
upon any unfair labor practice occurring more than six months prior to the
filing of the charge with the Board. 29 U.S.C. 160(b). Murphy Oil also
contends that the Board is collaterally estopped from considering whether it
was lawful to enforce the Arbitration Agreement because the district court
had already decided that issue in the Alabama litigation.
Both of these arguments were raised in Murphy Oil's answer to the Board's
complaint. They were not, though, discussed in its brief before the Board. No
objection that has not been urged before the Board shall be considered by
the court. 29 U.S.C. 160(e), (f). Similarly, we have held that [a]ppellate
preservation principles apply equally to petitions for enforcement or review of
NLRB decisions. NLRB v. Catalytic Indus. Maint. Co. (CIMCO), 964 F.2d 513,
521 [140 LRRM 2817] ( 5th Cir . 1992). While Murphy Oil may have properly
pled its statute of limitations and collateral estoppel defenses, it did not
sufficiently press those arguments before the Board. Thus, they are waived.
See 29 U.S.C. 160(e), (f).
II. D.R. Horton and Board Nonacquiescence
The Board, reaffirming its D.R. Horton analysis, held that Murphy Oil violated
Section 8(a)(1) of the NLRA by enforcing agreements that requir[ed]
employees to agree to resolve all employment-related claims through
individual arbitration. In doing so, of course, the Board disregarded this
court's contrary D.R. Horton ruling that such arbitration
Page 3492
agreements are enforceable and not unlawful. D.R. Horton, 737 F.3d at 362. 3
Our decision was issued not quite two years ago; we will not repeat its
analysis here. Murphy Oil committed no unfair labor practice by requiring
employees to relinquish their right to pursue class or collective claims in all
forums by signing the arbitration agreements at issue here. See id.
3
Several of our sister circuits have either indicated or expressly stated that
they would agree with our holding in D.R. Horton if faced with the same
question: whether an employer's maintenance and enforcement of a class or
collective action waiver in an arbitration agreement violates the NLRA. See
Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1336 [22 WH
Cases2d 310] (11th Cir. 2014), cert. denied, 134 S.Ct. 2886 [22 WH Cases2d
1608] (2014); Richards v. Ernst & Young, LLP, 744 F.3d 1072, 1075, n. 3 (9th
Cir. 2013), cert. denied, 135 S.Ct. 355 (2014); Owen v. Bristol Care, Inc ., 702
F.3d 1050, 1053-55 [20 WH Cases2d 24] (8th Cir . 2013); Sutherland v . Ernst
& Young LLP, 726 F.3d 290, 297, n. 8 [20 WH Cases2d 1866] (2d Cir . 2013).
Murphy Oil argues that the Board's explicit defiance of D.R. Horton
warrants issuing a writ or holding the Board in contempt so as to restrain [it]
from continuing its nonacquiescence practice with respect to this [c]ourt's
directive. The Board, as far as we know, has not failed to apply our ruling in
D.R. Horton to the parties in that case. The concern here is the application of
D.R. Horton to new parties and agreements.
An administrative agency's need to acquiesce to an earlier circuit court
decision when deciding similar issues in later cases will be affected by

whether the new decision will be reviewed in that same circuit. See Samuel
Estreicher & Richard L. Revesz, Nonacquiescence by Federal Administrative
Agencies, 98 Yale L.J. 679, 735-43 (1989). Murphy Oil could have sought
review in (1) the circuit where the unfair labor practice allegedly took place,
(2) any circuit in which Murphy Oil transacts business, or (3) the United
States Court of Appeals for the District of Columbia. 29 U.S.C. 160(f). The
Board may well not know which circuit's law will be applied on a petition for
review. We do not celebrate the Board's failure to follow our D.R. Horton
reasoning, but neither do we condemn its nonacquiescence.
III. The Agreements and NLRA Section 8(a)(1)
The Board also held that Murphy Oil's enforcement of the Arbitration
Agreement and Revised Arbitration Agreement violated Section 8(a)(1) of the
NLRA because employees could reasonably believe the contracts precluded
the filing of Board charges. Hobson and the other employees involved in the
Alabama litigation were subject to the Arbitration Agreement applicable to
employees hired before March 2012. The Revised Arbitration Agreement
contains language that sought to correct the possible ambiguity.
A. The Arbitration Agreement in Effect Before March 2012
[ 1 ] Section 8(a) of the NLRA makes it unlawful for an employer to commit
unfair labor practices. 29 U.S.C. 158(a). For example, an employer is
prohibited from interfering with employees exercise of their Section 7 rights.
Id. 158(a)(1). Under Section 7, employees have the right to self-organize and
engage in other concerted activities for the purpose of collective bargaining
or other mutual aid or protection. Id. 157.
The Board is empowered to prevent unfair labor practices. This power cannot
be limited by an agreement between employees and the employer. See id.
160(a). Wherever private contracts conflict with [the Board's] functions,
they must yield or the [NLRA] would be reduced to a futility. J.I. Case Co. v
. NLRB , 321 U.S. 332, 337 [14 LRRM 501] (1944). Accordingly, as we held in
D.R. Horton, an arbitration agreement violates the NLRA if employees would
reasonably construe it as prohibiting filing unfair labor practice charges with
the Board. 737 F.3d at 363.
Murphy Oil argues that Hobson's choice to file a charge with the Board
proves that the pre-March 2012 Arbitration Agreement did not state or
suggest such charges could not be filed. The argument misconstrues the
question. [T]he actual practice of employees is not determinative of
whether an employer has committed an unfair labor practice. See Flex Frac
Logistics, L.L.C. v . NLRB , 746 F.3d 205, 209 [198 LRRM 2789] ( 5th Cir.
2014). The Board has said that the test is whether the employer action is
likely to have a chilling effect on employees exercise of their rights. Id.
(citing Lafayette Park Hotel, 326 NLRB 824, 825 [159 LRRM 1243] (1998)).
The possibility that employees will misunderstand their rights was a reason
we upheld the Board's rejection of a similar provision of the arbitration
agreement in D.R. Horton. We explained that the FAA and NLRA have equal
importance in our review of employment arbitration contracts. D.R. Horton,
737 F.3d. at
Page 3493
357. We held that even though requiring arbitration of class or collective
claims in all forums does not deny a party any statutory right, an
agreement reasonably interpreted as prohibiting the filing of unfair labor

charges would unlawfully deny employees their rights under the NLRA. Id. at
357-58, 363-64.
Murphy Oil's Arbitration Agreement provided that any and all disputes or
claims [employees] may have which relate in any manner to
employment must be resolved by individual arbitration. Signatories further
waive their right to be a party to any group, class or collective action
claim in any other forum. The problem is that broad any claims
language can create [t]he reasonable impression that an employee is
waiving not just [her] trial rights, but [her] administrative rights as well. D.R.
Horton, 737 F.3d at 363-64 (citing Bill's Electric, Inc ., 350 NLRB 292, 295-96
[182 LRRM 1210] (2007)).
We do not hold that an express statement must be made that an employee's
right to file Board charges remains intact before an employment arbitration
agreement is lawful. Such a provision would assist, though, if incompatible or
confusing language appears in the contract. See id. at 364.
We conclude that the Arbitration Agreement in effect for employees hired
before March 2012, including Hobson and the others involved in the Alabama
case, violates the NLRA. The Board's order that Murphy Oil take corrective
action as to any employees that remain subject to that version of the
contract is valid.
B. The Revised Arbitration Agreement in Effect After March 2012
[ 2 ] In March 2012, following the Board's decision in D.R. Horton, Murphy Oil
added the following clause in the Revised Arbitration Agreement: [N]othing
in this Agreement precludes [employees] from participating in proceedings
to adjudicate unfair labor practice [] charges before the [Board]. The Board
contends that Murphy Oil's modification is also unlawful because it leaves
intact the entirety of the original Agreement including employees waiver of
their right to commence or be a party to any group, class or collective action
claim in any other forum. This provision, the Board said, could be
reasonably interpreted as prohibiting employees from pursuing an
administrative remedy since such a claim could be construed as having
commence[d] a class action in the event that the [Board] decides to seek
classwide relief.
We disagree with the Board. Reading the Murphy Oil contract as a whole, it
would be unreasonable for an employee to construe the Revised Arbitration
Agreement as prohibiting the filing of Board charges when the agreement
says the opposite. The other clauses of the agreement do not negate that
language. We decline to enforce the Board's order as to the Revised
Arbitration Agreement.
IV. Murphy Oil's Motion to Dismiss and NLRA Section 8(a)(1)
[ 3 ] Finally, the Board held that Murphy Oil violated Section 8(a)(1) by filing
its motion to dismiss and compel arbitration in the Alabama litigation. As
noted above, Section 8(a) prohibits employers from engaging in unfair labor
practices. 29 U.S.C. 158(a). Section 8(a)(1) provides that an employer
commits an unfair labor practice by interfer[ing] with, restrain[ing], or
coerc[ing] employees in the exercise of their Section 7 rights, including
engaging in protected concerted activity. Id. 157, 158(a)(1).
The Board said that in filing its dispositive motion and eight separate court
pleadings and related [documents] between September 2010 and February
2012, Murphy Oil acted with an illegal objective [in] seeking to enforce

an unlawful contract provision that would chill employees Section 7 rights,

and awarded attorneys fees and expenses incurred in opposing the
unlawful motion. We disagree and decline to enforce the fees award.
The Board rooted its analysis in part in Bill Johnson's Restaurants, Inc . v .
NLRB , 461 U.S. 731 [113 LRRM 2647] (1983). That decision discussed the
balance between an employer's First Amendment right to litigate and an
employee's Section 7 right to engage in concerted activity. In that case, a
waitress filed a charge with the Board after a restaurant terminated her
employment; she believed she was fired because she attempted to organize
a union. Id. at 733. After the Board's General Counsel issued a complaint, the
waitress and several others picketed the restaurant, handing out leaflets and
asking customers to boycott eating there. Id. In response, the restaurant filed
a lawsuit in state court against the demonstrators alleging that they had
blocked access to the restaurant, created a threat to public safety, and made
libelous statements about the business and its management. Id. at 734. The
waitress filed a second charge with the
Page 3494
Board alleging that the restaurant initiated the civil suit in retaliation for
employees engaging in Section 7 protected concerted activity, which
violated Section 8(a)(1) and (4) of the NLRA. Id. at 734-35.
The Board held that the restaurant's lawsuit constituted an unfair labor
practice because it was filed for the purpose of discouraging employees from
seeking relief with the Board. Id. at 735-37. The Supreme Court remanded the
case for further consideration, stating: The right to litigate is an important
one, but it can be used by an employer as a powerful instrument of
coercion or retaliation. Id. at 740, 744. To be enjoinable, the Court said the
lawsuit prosecuted by the employer must (1) be baseless or lack[ing] a
reasonable basis in fact or law, and be filed with the intent of retaliating
against an employee for the exercise of rights protected by Section 7, or (2)
have an objective that is illegal under federal law. Id. at 737, n. 5, 744, 748.
We start by distinguishing this dispute from that in Bill Johnsons. The current
controversy began when three Murphy Oil employees filed suit in Alabama.
Murphy Oil defended itself against the employees claims by seeking to
enforce the Arbitration Agreement. Murphy Oil was not retaliating as Bill
Johnson's may have been. Moreover, the Board's holding is based solely on
Murphy Oil's enforcement of an agreement that the Board deemed unlawful
because it required employees to individually arbitrate employment-related
disputes. Our decision in D.R. Horton forecloses that argument in this circuit.
737 F.3d at 362. Though the Board might not need to acquiesce in our
decisions, it is a bit bold for it to hold that an employer who followed the
reasoning of our D.R. Horton decision had no basis in fact or law or an illegal
objective in doing so. The Board might want to strike a more respectful
balance between its views and those of circuit courts reviewing its orders.
Moreover, the timing of Murphy Oil's motion to dismiss when compared to
the timing of the D.R. Horton decisions counsels against finding a violation of
Section 8(a)(1). The relevant timeline of events is as follows:
(1) July 2010: Murphy Oil filed its motion to dismiss and sought to compel
arbitration in the Alabama litigation;
(2) January 2012: the Board in D.R. Horton held it to be unlawful to require
employees to arbitrate employment-related claims individually, and the D.R.

Horton agreement violated the NLRA because it could be reasonably

construed as prohibiting the filing of Board charges;
(3) October 2012: the Board's General Counsel amended the complaint
against Murphy Oil to allege that Murphy Oil's motion in the Alabama
litigation violated Section 8(a)(1); and
(4) December 2013: this court granted D.R. Horton's petition for review of the
Board's order and held that agreements requiring individual arbitration of
employment-related claims are lawful but that the specific agreement was
unlawful because it could be reasonably interpreted as prohibiting the filing of
Board charges.
In summary, Murphy Oil's motion was filed a year and a half before the Board
had even spoken on the lawfulness of such agreements in light of the NLRA.
This court later held that such agreements were generally lawful. Murphy Oil
had at least a colorable argument that the Arbitration Agreement was valid
when its defensive motion was made, as its response to the lawsuit was not
lack[ing] a reasonable basis in fact or law, and was not filed with an illegal
objective under federal law. See Bill Johnsons, 461 U.S. at 737, n. 5, 744,
748. Murphy Oil's motion to dismiss and compel arbitration did not constitute
an unfair labor practice because it was not baseless. We decline to enforce
the Board's order awarding attorneys fees and expenses.
***
The Board's order that Section 8(a)(1) has been violated because an
employee would reasonably interpret the Arbitration Agreement in effect for
employees hired before March 2012 as prohibiting the filing of an unfair labor
practice charge is ENFORCED. Murphy Oil's petition for review of the Board's
decision is otherwise GRANTED.
Page 3495
- End of Case 26 WH Cases2d 1460
Morris v. Ernst & Young, LLP
U.S. Court of Appeals,
Ninth Circuit
No. 13-16599
August 22, 2016
2016 BL 276240
STEPHEN MORRIS and KELLY MCDANIEL, on behalf of themselves and all
others similarly situated, Plaintiffs-Appellants v. ERNST & YOUNG, LLP and
ERNST & YOUNG U.S., LLP, Defendants-Appellees
Headnotes
FAIR LABOR STANDARDS ACT and STATE LAWS
[1] Overtime claims Employee misclassification Arbitration
Concerted action waiver NLRB violation California law 101.1601
136.1601 411.01 425.3105 425.37 510.18
Federal district court erroneously ordered individual arbitration in employees class
action alleging that auditing firm misclassified employees to deny them overtime
wages in violation of FLSA and California Labor Law, even though employees signed,
as condition of employment, agreements that contained concerted action waiver
requiring them to pursue legal claim individually in arbitration, where firm interfered
with employees right to engage in concerted activity under National Labor Relations
Act by requiring them to resolve all of their legal claims in separate proceedings

given that NLRA Section 7s mutual aid or protection clause includes substantive
right to collectively seek to improve working conditions through resort to
administrative and judicial forums, employer may not under NLRA Section 8 defeat
this right by requiring employees to pursue all work-related legal claims individually,
and when arbitration contract professes to waive substantive federal right, savings
clause of Federal Arbitration Act prevents enforcement of that waiver.
Case History and Disposition
Appeal from the U.S. District Court for the Northern District of California (20 WH
Cases2d 1807). Reversed and remanded.
Attorneys
Max Folkenflik (Folkenflik & McGerity, New York, N.Y., H. Tim Hoffman and H. Tim
Hoffman Law, Oakland, Cal., and Ross L. Libenson and Libenson Law, Oakland, Cal.,
on brief), for appellants.
Rex S. Heinke (Gregory W. Knopp and Akin Gump Strauss Hauer & Feld, Los Angeles,
Cal., and Daniel L. Nash and Akin Gump Strauss Hauer & Feld, Washington, D.C., on
brief), for appellees.
Richard F. Griffin Jr., General Counsel, Jennifer Abruzzo, Deputy General Counsel, John
H. Ferguson, Associate General Counsel, Linda Dreeben, Nancy E. Kessler Platt, and
Meredith L. Jason, Deputy Assistant General Counsel, Kira Dellinger Vol, Supervisory
Attorney, and Paul L. Thomas, National Labor Relations Board, Washington, D.C., for
amicus curiae National Labor Relations Board.
Judge
Before THOMAS, Chief Circuit Judge, and IKUTA and HURWITZ, Circuit Judges.
Opinion Text
Opinion By:
THOMAS, Circuit Judge.
In this case, we consider whether an employer violates the National Labor Relations
Act by requiring employees to sign an agreement precluding them from bringing, in
any forum, a concerted legal claim regarding wages, hours, and terms and conditions
of employment. We conclude that it does, and vacate the order of the district court
compelling individual arbitration.
I
Stephen Morris and Kelly McDaniel worked for the accounting firm Ernst & Young. As a
condition of employment, Morris and McDaniel were required to sign agreements not
to join with other employees in bringing legal claims against the company. This
concerted action waiver required employees to (1) pursue legal claims against
Ernst & Young exclusively through arbitration and (2) arbitrate only as individuals and
in separate proceedings. The effect of the two provisions is that employees could
not initiate concerted legal claims against the company in any forumin court, in
arbitration proceedings, or elsewhere.
Nonetheless, Morris brought a class and collective action against Ernst & Young in
federal court in New York, which McDaniel later joined. According to the complaint,
Ernst & Young misclassified Morris and similarly situated employees. Morris alleged
that the firm relied on the misclassification to deny overtime wages in violation of the
Fair Labor Standards Act (FLSA), 29 U.S.C.A. 201 et seq., and California labor laws.
The case was eventually transferred to the Northern District of California. There, Ernst
& Young moved to compel arbitration pursuant to the agreements signed by Morris
and McDaniel. The court ordered individual arbitration and dismissed the case. This
timely appeal followed.
Morris and McDaniel argue that their agreements with the company violate federal
Page 1462
labor laws and cannot be enforced. They claim that the separate proceedings
clause contravenes three federal statutes: the National Labor Relations Act (NLRA),
29 U.S.C. 151 et. seq., the Norris LaGuardia Act, 29 U.S.C. 101 et seq., and the
FLSA. Relevant here, Morris and McDaniel rely on a determination by the National

Labor Relations Board (NLRB or Board) that concerted action waivers violate the
NLRA. D.R. Horton, 357 NLRB No. 184 [192 LRRM 1137] (2012) (Horton I), enf.
denied 737 F.3d 344 [197 LRRM 2637] (5th Cir. 2013) (Horton II); see also Murphy
Oil USA, Inc., 361 NLRB No. 72 [201 LRRM 1385] (2014) (Murphy Oil I), enf. denied
808 F.3d 1013 (5th Cir. 2015) (Murphy Oil II).
We have jurisdiction under 28 U.S.C. 1331 and review the district court's order to
compel arbitration de novo.Balen v. Holland Am. Line, Inc., 583 F.3d 647, 652 [15 WH
Cases2d 609] (9th Cir. 2009).
II
This case turns on a well-established principle: employees have the right to pursue
work-related legal claims together. 29 U.S.C. 157; Eastex, Inc. v. NLRB, 437 U.S.
556, 566 [98 LRRM 2717] (1978). Concerted activitythe right of employees to act
togetheris the essential, substantive right established by the NLRA. 29 U.S.C. 157.
Ernst & Young interfered with that right by requiring its employees to resolve all of
their legal claims in separate proceedings. Accordingly, the concerted action waiver
violates the NLRA and cannot be enforced.
A
The Supreme Court has often reaffirmed that the task of defining the scope of [NLRA
rights] is for the Board to perform in the first instance as it considers the wide
variety of cases that come before it. NLRB v. City Disposal Sys. Inc., 465 U.S. 822,
829 [115 LRRM 3193] (1984) (quoting Eastex, 437 U.S. at 568). [C]onsiderable
deference thus attaches to the Board's interpretations of the NLRA. Id. Thus, we
begin our analysis with the Board's treatment of similar contract terms.
The Board has concluded that an employer violates the NLRA
when it requires employees covered by the Act, as a condition of their employment,
to sign an agreement that precludes them from filing joint, class, or collective claims
addressing their wages, hours, or other working conditions against the employer in
any forum, arbitral or judicial.
Horton I, 357 NLRB No. 184 [192 LRRM 1137], slip op. at 1.
The Board's determination rested on two precepts. First, the Board interpreted the
NLRA's statutory right to engage in concerted activities for the purpose of
mutual aid or protection to include a right to join together to pursue workplace
grievances, including through litigation. Id. at 2 (interpreting 29 U.S.C. 157).
Second, the Board held that an employer may not circumvent the right to concerted
legal activity by requiring that employees resolve all employment disputes
individually. Id. at 4-5, 13 (interpreting 29 U.S.C. 158). In other words, employees
must be able to initiate a work-related legal claim together in some forum, whether in
court, in arbitration, or somewhere else. Id. A concerted action waiver prevents this:
employees may only resolve disputes in a single forumhere, arbitrationand they
may never do so in concert. Id. 1
1
The contract in Horton I required all claims to be heard in arbitration and required
the arbitrator to hear only Employee's individual claims. Horton I, 357 NLRB No.
184 [192 LRRM 1137], slip op. at 1. It also contained an express waiver of class or
collective proceedings in arbitration. Id. Ernst & Young concedes that the separate
proceedings term in the exclusive arbitration agreements here has the same effect.
The Supreme Court has instructed us to review the Board's interpretations of the
NLRA under the familiar two-step framework set forth in Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 & n.9 (1984).
Lechmere, Inc. v. NLRB, 502 U.S. 527, 536 [139 LRRM 2225] (1992) (Chevron
framework applies to NLRB constructions of the NLRA). The Board's reasonable
interpretations of the NLRA command deference, while the Board's remedial
preferences and interpretations of unrelated statutes do not. Hoffman Plastic
Compounds, Inc. v. NLRB, 535 U.S. 137, 143-44 [169 LRRM 2769] (2002). 2
2
The Board has both rulemaking and adjudicative powers, 29 U.S.C. 156, 160, and
it may authoritatively interpret the NLRA through either process. NLRB v. Bell

Aerospace Co. Div. of Textron, 416 U.S. 267, 294 [85 LRRM 2945] (1974) (concluding
that the Board may announce new principles in an adjudicative proceeding). Our
analysis under Chevron does not extend to the Board's interpretation of statutes it
does not administer, to the Board's interpretation of Supreme Court cases, or to the
Board's remedial preferences.
Page 1463
Under Chevron, we first look to see whether Congress has directly spoken to the
precise question at issue. Chevron, 467 U.S. at 842. In analyzing Congressional
intent, we employ the traditional tools of statutory construction. Id. at 843 & n. 9.
We not only look at the precise statutory section in question, but we also analyze the
provision in the context of the governing statute as a whole, presuming congressional
intent to create a symmetrical and coherent regulatory scheme. Food & Drug
Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (quoting
Gustafson v. Alloyd Co., 513 U.S. 561, 569 (1995)). If we conclude that the intent of
Congress is clear, that is the end of the matter; for the court, as well as the agency,
must give effect to the unambiguously expressed intent of Congress. Chevron, 467
U.S. at 842-43.
In this case, we need go no further. The intent of Congress is clear from the statute
and is consistent with the Board's interpretation.
To determine whether the NLRA permits a total waiver on concerted legal activity by
employees, we begin with the words of the statute. The NLRA establishes the rights
of employees in 7. It provides that:
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
29 U.S.C. 157.
Section 8 enforces these rights by making it an unfair labor practice for an employer
to interfere with, restrain, or coerce employees in the exercise of the rights
guaranteed in [ 7]. 29 U.S.C. 158; see NLRB v. Bighorn Beverage, 614 F.2d 1238,
1241 [103 LRRM 3008] (9th Cir. 1980) (describing relationship between sections; 7
establishes rights and 8 enforces them).
Section 7 protects a range of concerted employee activity, including the right to
seek to improve working conditions through resort to administrative and judicial
forums. Eastex, 437 U.S. at 566; see also City Disposal Sys., 465 U.S. at 835 (There
is no indication that Congress intended to limit [ 7] protection to situations in which
an employee's activity and that of his fellow employees combine with one another in
any particular way.). Therefore, a lawsuit filed in good faith by a group of
employees to achieve more favorable terms or conditions of employment is
concerted activity under 7 of the National Labor Relations Act. Brady v. NFL, 644
F.3d 661, 673 [190 LRRM 3441] (8th Cir. 2011). So too is the filing by employees of a
labor related civil action. Altex Ready Mixed Concrete Corp. v. NLRB, 542 F.2d 295,
297 [93 LRRM 2940] (5th Cir. 1976). Courts regularly protect employees right to
pursue concerted work-related legal claims under 7. Mohave Elec. Coop., Inc. v.
NLRB, 206 F.3d 1183, 1189 [163 LRRM 2917] (D.C. Cir. 2000) (filing a civil action by
a group of employees is protected activity under 7) (internal quotation marks and
citation omitted); Leviton Mfg. Co. v. NLRB, 486 F.2d 686, 689 [84 LRRM 2670] (1st
Cir. 1973) (same).
It is also well-established that the NLRA establishes the right of employees to act in
concert: Employees shall have the right to engage in other concerted activities
for the purpose of collective bargaining or other mutual aid and protection. 29 U.S.C.
157 (emphasis added). Concerted action is the basic tenet of federal labor policy,
and has formed the core of every significant federal labor statute leading up to the
NLRA. City Disposal Sys., 465 U.S. at 834-35 (describing history of the term concert
in statutes affecting federal labor policy). Taken together, these two features of the

NLRA establish the right of employees to pursue work-related legal claims, and to do
so together. The pursuit of a concerted work-related legal claim clearly falls within
the literal wording of 7 that [e]mployees shall have the right to engage in
concerted activities for the purpose of mutual aid or protection. NLRB v. J.
Weingarten, Inc., 420 U.S. 251, 260 [88 LRRM 2689] (1975) (quoting 29 U.S.C. 157).
The intent of Congress in 7 is clear and comports with the Board's interpretation of
the statute. 3
3
Eastex clarifies that concerted activity extends to judicial forums, and it does not
limit concerted activity to any particular vehicle or mechanism. 437 U.S. at 556 &
n.15. Further, we reject the argument that the NLRA cannot protect a right to
concerted legal action because Rule 23 class actions did not exist until after the NLRA
was passed. See City Disposal Sys., 465 U.S. at 835 (noting that the NLRA has
forward-looking view of 7 protections). Rule 23 is not the source of employee rights;
the NLRA is. Eastex settles this question by expressly including concerted legal
activity within the set of protected 7 activities. 437 U.S. at 566.
Page 1464
The same is true for the Board's interpretation of 8's enforcement provisions.
Section 8 establishes that [i]t shall be an unfair labor practice for an employer to
interfere with, restrain, or coerce employees in the exercise of the rights guaranteed
in section 157. 29 U.S.C. 158. A separate proceedings clause does just that: it
prevents the initiation of any concerted work-related legal claim, in any forum.
Preventing the exercise of a 7 right strikes us as interference within the meaning
of 8. Thus, the Board's determination that a concerted action waiver violates 8 is
no surprise. And an employer violates 8 a second time by conditioning employment
on signing a concerted action waiver. Nat'l Licorice Co. v. NLRB, 309 U.S. 350, 364 [6
LRRM 674] (1940) (Obviously employers cannot set at naught the National Labor
Relations Act by inducing their workmen to agree to waive the statute's substantive
protections); see Retlaw Broad. Co., 310 NLRB no. 160, slip op. at 14 (1993),
enforced, 53 F.3d 1002 [149 LRRM 2134] (9th Cir. 1995) (section 8 prohibits
conditioning employment on waiver of 7 right). 4 Again, we need not proceed to the
second step of Chevron because the intent of Congress in 8 is clear and matches
the Board's interpretation.
4
In contrast, there was no 8 violation in Johnmohammadi v. Bloomingdale's, Inc.
because the employee there could have opted out of the individual dispute resolution
agreement and chose not to. 755 F.3d 1072, 1076 (9th Cir. 2014).
Section 8 has long been held to prevent employers from circumventing the NLRA's
protection for concerted activity by requiring employees to agree to individual
activity in its place. National Licorice, for example, involved a contract clause that
discouraged workers from redressing grievances with the employer in any way
except personally. 309 U.S. at 360. This clause violated the NLRA. Id. at 361. The
individual dispute resolution practice envisioned by the contract, and required by the
employer, represented a continuing means of thwarting the policy of the Act. Id.
Similarly, J.H. Stone & Sons, 125 F.2d 752 [9 LRRM 578] (7th Cir. 1942), concluded
that individual dispute resolution requirements nullify the right to concerted activity
established by 7:
By the clause in dispute, the employee bound himself to negotiate any differences
with the employer and to submit such differences to arbitration. The result of this
arbitration was final. Thus the employee was obligated to bargain individually and, in
case of failure, was bound by the result of arbitration. This is the very antithesis of
collective bargaining.
Id. at 756.
The separate proceedings clause in this case is no different. Under the clause, the
employee is obligated to pursue work-related claims individually and, no matter the
outcome, is bound by the result. This restriction is the very antithesis of 7's
substantive right to pursue concerted work-related legal claims. For the same reason,

the Seventh Circuit recently concluded that [a] contract that limits Section 7 rights
that is agreed to as a condition of continued employment qualifies as interfer[ing]
with or restrain[ing] employees in the exercise of those rights in violation of
Section 8(a)(1). Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1155 [26 WH Cases2d 795]
(7th Cir. 2016). Indeed, 7 rights would amount to very little if employers could
simply require their waiver.
[ 1 ] In sum, the Board's interpretation of 7 and 8 is correct. Section 7's mutual
aid or protection clause includes the substantive right to collectively seek to
improve working conditions through resort to administrative and judicial forums.
Eastex, 437 U.S. at 566; accord City Disposal Sys., 465 U.S. at 834-35. Under 8, an
employer may not defeat the right by requiring employees to pursue all work-related
legal claims individually. See J.I. Case Co. v. NLRB, 321 U.S. 332, 337 [14 LRRM 501]
(1944) (Individual contracts may not be availed of to defeat or delay the
procedures prescribed by the National Labor Relations Act). The NLRA is
unambiguous, and there is no need to proceed to the second step of Chevron. 5
5
Because congressional intent can be ascertained employing the usual tools of
statutory construction, we do not proceed to step two of the Chevron analysis.
However, if that analysis were undertaken, the only conclusion could be that [t]he
Board's holding is a permissible construction of concerted activities for mutual aid
or protection by the agency charged by Congress with enforcement of the Act.
Weingarten, 420 U.S. at 260 (quoting 29 U.S.C. 157).
Page 1465
Applied to the Ernst & Young contract, 7 and 8 make the terms of the concerted
action waiver unenforceable. The separate proceedings clause prevents concerted
activity by employees in arbitration proceedings, and the requirement that
employees only use arbitration prevents the initiation of concerted legal action
anywhere else. The result: interference with a protected 7 right in violation of 8.
Thus, the separate proceedings terms in the Ernst & Young contracts cannot be
enforced. 6
6
Ernst & Young also argues for the first time on appeal that there is no evidence that
Morris and McDaniel are statutory employees covered by the NLRA. This argument
was not adequately raised before the district court and is therefore waived. See Solis
v. Matheson, 563 F.3d 425, 437 (9th Cir. 2009). Likewise, we also reject the claim that
the Board's interpretations of the NLRA in Horton I and Murphy Oil I do not apply here
because there was no NLRB proceeding or finding of an unfair labor practice. We
agree with the agency's interpretation of the NLRA because it gives effect to
Congress's intent. Our agreement has nothing to do with the procedural history of the
cases from which the Board's interpretation arose.
B
The Federal Arbitration Act (FAA) does not dictate a contrary result. The separate
proceedings provision in this case appears in an agreement that directs
employment-related disputes to arbitration. But the arbitration requirement is not the
problem. The same provision in a contract that required court adjudication as the
exclusive remedy would equally violate the NLRA. The NLRA obstacle is a ban on
initiating, in any forum, concerted legal claimsnot a ban on arbitration.
The FAA was enacted in 1925 in response to widespread judicial hostility to
arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).
In relevant part, it provides that,
A written provision in any maritime transaction or a contract evidencing a transaction
involving commerce to settle by arbitration a controversy thereafter arising out of
such contract or transaction shall be 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. The Act requires courts to place arbitration contracts on equal footing
with all other contracts, DIRECTV, Inc. v. Imburgia, 136 S.Ct. 463, 468 (2015)
(quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)), and to

enforce them according to their terms, Concepcion, 563 U.S. at 339. Not all
contract terms receive blanket enforcement under the FAA, however. The FAA's
saving clause permits agreements to arbitrate to be invalidated by generally
applicable contract defenses, such as fraud, duress, or unconscionability, but not by
defenses that apply only to arbitration or that derive their meaning from the fact that
an agreement to arbitrate is at issue.
Id. (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)).
Accordingly, when a party raises a defense to the enforcement of an arbitration
provision, a court must determine whether the defense targets arbitration contracts
without due regard to the federal policy favoring arbitration. DIRECTV, 136 S.Ct.
at 471 (quoting Volt Info. Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489
U.S. 468, 476 (1989)).
The contract defense in this case does not derive [its] meaning from the fact that an
agreement to arbitrate is at issue. Concepcion, 563 U.S. at 339. An agreement to
arbitrate work-related disputes does not conflict with the NLRA. Indeed, federal labor
policy favors and promotes arbitration. United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 578 [46 LRRM 2416] (1960).
The illegality of the separate proceedings term here has nothing to do with
arbitration as a forum. It would equally violate the NLRA for Ernst & Young to require
its employees to sign a contract requiring the resolution of all work-related disputes
in court and in separate proceedings. The same infirmity would exist if the contract
required disputes to be resolved through casting lots, coin toss, duel, trial by ordeal,
or any other dispute resolution mechanism, if the contract (1) limited resolution to
that mechanism and (2) required separate individual proceedings. The problem with
the contract at issue is not that it requires arbitration; it is that the contract term
defeats a substantive federal right to pursue concerted work-related legal claims. 7
7
In contrast, the arbitration cases cited by the dissent and Ernst & Young involved
litigants seeking to avoid an arbitral forumtheir defenses targeted arbitration. Here,
Morris and McDaniel seek to exercise substantive rights guaranteed by federal
statute in some forum, including in arbitration.
Page 1466
When an illegal provision not targeting arbitration is found in an arbitration
agreement, the FAA treats the contract like any other; the FAA recognizes a general
contract defense of illegality. 8 9 U.S.C. 2; Concepcion, 563 U.S. at 339. The term
may be excised, or the district court may decline enforcement of the contract
altogether. See 19 Richard Lord, 8 Williston on Contracts 19:70 (4th ed. 1990)
(Illegal portions of a contractual agreement may be severed if the illegal provision is
not central to the parties agreement.); see also Sakkab v. Luxottica Retail N. Am.,
Inc., 803 F.3d 425, 433 [25 WH Cases2d 675] (9th Cir. 2015) (generally applicable
contract defense is preserved by 2's saving clause).
8
Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010), is not to
the contrary. Under Stolt, an arbitrator may not add to the terms of an arbitration
agreement, and therefore may not order class arbitration unless the contract
provides for it Id. at 684. This does not require a court to enforce an illegal term. Nor
would Stolt prevent the district court, on remand, from severing the separate
proceedings clause to bring the arbitration provision into compliance with the NLRA.
Crucial to today's result is the distinction between substantive rights and
procedural rights in federal law. The Supreme Court has often described rights that
are the essential, operative protections of a statute as substantive rights. Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 29 [55 FEP Cases 1116] (1991) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). In
contrast, procedural rights are the ancillary, remedial tools that help secure the
substantive right. See id.; CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 671
(2012) (describing difference between statute's guarantee and provisions
contemplating ways to enforce the core guarantee). 9

The Age Discrimination in Employment Act (ADEA), for example, establishes a

primary, substantive right against age discrimination. 29 U.S.C. 623; Gilmer, 500
U.S. at 27. It provides for collective proceedings as one way, among many, to secure
that right. 29 U.S.C. 626 (providing for Recordkeeping, investigation, and
enforcement of the ADEA, including collective legal redress).
The difference is key, because substantive rights cannot be waived in arbitration
agreements. This tenet is a fundamental component of the Supreme Court's
arbitration jurisprudence: [b]y agreeing to arbitrate a statutory claim, a party does
not forgo the substantive rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial, forum. Mitsubishi, 473 U.S. at 628.
Thus, if a contract term in an arbitration agreement operate[s] as a prospective
waiver of a party's right to pursue statutory remedies for [substantive rights], we
would have little hesitation in condemning the agreement. Id. at 637 n.19; see also
Am. Exp. Co. v. Italian Colors Rest., 133 S.Ct. 2304, 2310 (2013); Green Tree Fin.
Corp.-Al. v. Randolph, 531 U.S. 79, 90 [84 FEP Cases 769] (2000); Gilmer, 500 U.S. at
28; Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 240 (1987).
The FAA does not mandate the enforcement of contract terms that waive substantive
federal rights. Thus, when an arbitration contract professes the waiver of a
substantive federal right, the FAA's saving clause prevents a conflict between the
statutes by causing the FAA's enforcement mandate to yield. See Epic Sys., 823 F.3d
at 1159 (Because the NLRA renders [the defendant's] arbitration provision illegal,
the FAA does not mandate its enforcement.). 10
10
Contrary to the suggestions of the dissent, the Supreme Court has repeatedly
endorsed the distinctive roles of substantive and procedural rights in its recent
arbitration case law. As recently as Italian Colors, the Supreme Court has held that
the key question for courts assessing a statutory rights claim arising from an
arbitration agreement is whether the agreement constitute[s] the elimination of the
right to pursue that remedy. 133 S.Ct. at 2311 (emphasis in original). Similarly, in
CompuCredit, the Court distinguished the core, substantive guarantee of the Credit
Repair Organizations Act (CROA) from a provision that contemplated the possibility
of a judicial forum for vindicating the core right. 132 S.Ct. at 671 (holding that
contract parties remain free to specify their choice of judicial forum so long as the
guarantee of the Act is preserved. (emphasis in original)). Contract parties can
agree on the procedural terms they like (such as resolving disputes in arbitration),
but they may not agree to leave the substantive protections of federal law at the
door.
The rights established in 7 of the NLRAincluding the right of employees to pursue
legal claims togetherare substantive. They are the central, fundamental protections
of the Act, so the FAA does not mandate the enforcement of a contract that alleges
their
Page 1467
waiver. The text of the Act confirms the central role of 7: that section establishes
the Right of employees as to organization. 29 U.S.C. 157 (emphasis added). No
other provision of the Act creates these sorts of rights. Without 7, the Act's entire
structure and policy flounder. For example, 8 specifically refers to the exercise of
the rights guaranteed in section 157. 28 U.S.C. 158; Bighorn Beverage, 614 F.2d at
1241 (Section 8(a)(1) of the Act implements [ 7's] guarantee).
The Act's other enforcement sections are similarly confused without the rights
established in 7. See, e.g., 29 U.S.C. 160 (providing powers of the Board to prevent
interference with rights in 7). There is no doubt that Congress intended for 7 and
its right to concerted activities to be the primary substantive provision of the
NLRA. See Gilmer, 500 U.S. at 24. For this reason, the right to concerted employee
activity cannot be waived in an arbitration agreement. 11
11
An individual can opt-out of a class action, or opt-in to a collective action, in federal
court (both procedural mechanisms). This does not enable an employer to require the

same individual to waive the substantive labor right to initiate concerted activities
set forth in the NLRA.
The dissent ignores this fundamental component of the Supreme Court's arbitration
jurisprudence and argues that we must first locate a contrary congressional
command before preventing the enforcement of an invalid contract term. But as the
Seventh Circuit put it, this argument puts the cart before the horse. Epic Sys., 823
F.3d at 1156. Rather, [b]efore we rush to decide whether one statute eclipses
another, we must stop to see if the two statutes conflict at all. Id. The saving clause
in the FAA prevents the need for such a conflict.
The dissent and Ernst & Young insist that we must effectively ignore the saving
clause and first search to see which of two statutes will trump the other. But this is
not the way the Supreme Court has instructed us to approach statutory construction.
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 533 (1995)
([W]hen two statutes are capable of co-existence it is the duty of the courts,
absent a clearly expressed congressional intention to the contrary, to regard each as
effective. (citation omitted)). Nor is a hunt for statutory conflict the single question
the Supreme Court has told us to ask when examining the FAA's interaction with
other federal statutes. Dissent at 35-36. Indeed, if we first had to locate a conflict
between the FAA and other statutes, the FAA's saving clause would serve no purpose,
which cannot be the case. TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (a statute
ought, upon the whole, to be so construed that, if it can be prevented, no clause,
sentence, or word shall be superfluous, void, or insignificant (citation omitted)); see
Epic Sys., 823 F.3d at 1157 (holding that there is no inherent conflict between the FAA
and the NLRA). 12 Instead, we join the Seventh Circuit in treating the interaction
between the NLRA and the FAA in a very ordinary way: when an arbitration contract
professes to waive a substantive federal right, the saving clause of the FAA prevents
the enforcement of that waiver. 13
12
Neither the text of the FAA nor the Supreme Court's arbitration cases support the
dissent's theory that the FAA's saving clause functions differently when a federal, as
opposed to state, statute renders a contract term susceptible to an illegality defense.
13
Because we see no inherent conflict between the FAA and the NLRA, we make no
holding on which statute would win in a fight, nor do we opine on the meaning of
their respective dates of passage, re-passage, and amendment.
Thus, the dissent's citations to cases involving the waiver of procedural rights are
misplaced. CompuCredit, for example, was a choice-of-judicial-forum case that
addressed the waiver of procedural rights. In the Supreme Court's words, the case
concerned whether claims under the [CROA] can proceed in an arbitrable forum.
132 S.Ct. at 673. In today's case, the issue is not whether any particular forum,
including arbitration, is available but rather which substantive rights must be
available within the chosen forum. And the Supreme Court has repeatedly held that
the core, substantive rights created by federal law survive contract terms that
purport their waiver. Such was the case in CompuCredit, where the Court concluded
that the use of a judicial forum contemplated by the CROA could be waived so long
as the guarantee of the legal power to impose liabilityis preserved. 132 S.Ct. at
671 (emphasis in original). In other words, parties can choose their forums but they
cannot contract away the basic guarantees of a federal statute.
Gilmer was also a judicial-choice-of-forum case that addressed the waiver of
procedural rights. There the Supreme Court again distinguished
Page 1468
between a waivable procedural right (to use a court for class claims rather than
arbitration) and a nonwaivable substantive right (to be free from age discrimination).
500 U.S. at 27-29. Not surprisingly, the Court held that the procedural right to use
class proceedings in federal court could be waived. Id. at 32. 14
14
In fact, the arbitration procedures in Gilmer allowed for collective proceedings. Id.
The plaintiff simply preferred court adjudication.

Italian Colors, as well, was a judicial forum case that endorsed the distinction
between a statute's basic guarantee and the various ways litigants may go about
vindicating it. The Court was careful to distinguish between the matters involved in
proving a statutory remedy and whether an agreement constitute[s] the
elimination of the right to pursue that remedy. Italian Colors, 133 S.Ct. at 2311. The
plaintiffs objected that it would be infeasible to pursue their antitrust claims against
the defendant without the ability to form a class. The Court rejected this argument,
noting that so long as the substantive federal right remainsthere, the right to
pursue antitrust claims in some forumthen the arbitration agreements would be
enforced according to their terms. Id. at 2310-12.
The dissent misreads these cases to require a conflict between the FAA and the
substantive provisions of other federal statutes. But as the Supreme Court has
repeatedly made clear, there is a limiting principle built into the FAA on what may be
waived in arbitration: where substantive rights are at issue, the FAA's saving clause
works in conjunction with the other statute to prevent conflict.
The interaction between the NLRA and the FAA makes this case distinct from other
FAA enforcement challenges in at least three additional and important ways.
First, because a substantive federal right is waived by the contract here, it is accurate
to characterize its terms as illegal. The dissent objects that a term in an arbitration
contract can only be illegal if Congress issues a contrary command specifically
referencing arbitration. But then it proceeds to cite cases where no substantive
federal rights were waived. In those cases, the conflict between contract terms and
federal law was less direct. In Italian Colors, for example, the Court concluded that
the antitrust laws establish no statutory right to pursue concerted claims: the acts
make no mention of class actions. Id. at 2309. In contrast, the federal statutory
regime in this case does exactly the opposite. Where the antitrust laws are silent on
the issue of concerted legal redress, the NLRA is unambiguous: concerted activity is
the touchstone, and a ban on the pursuit of concerted work-related legal claims
interferes with a core, substantive right.
Second, the enforcement defense in this case has nothing to do with the adequacy of
arbitration proceedings. In Concepcion and Italian Colors, the Court held that
arguments about the adequacy of arbitration necessarily yield to the policy of the
FAA. Concepcion, 563 U.S. at 351; Italian Colors, 133 S.Ct. at 2312. The Court
specifically rejected the argument that class arbitration [is] necessary to prosecute
claims that might otherwise slip through the legal system. Italian Colors, 133 S.Ct.
at 2312 (quoting Concepcion, 563 U.S. at 351). Here, the NLRA's prohibition on
enforcing the separate proceedings clause has nothing to do with the adequacy of
arbitration. The dissent and Ernst & Young attempt to read Concepcion for the
proposition that concerted claims and arbitration are fundamentally inconsistent. But
Concepcion makes no such holding. Concepcion involved a consumer arbitration
contract, not a labor contract, and there was no federal statutory scheme that
declared the contract terms illegal. 563 U.S. at 338. The defense in that case was
based on a judge-made state law rule. In contrast, the illegality of the contract term
here follows directly from the NLRA. Arbitration between groups of employees and
their employers is commonplace in the labor context. It would no doubt surprise
many employers to learn that individual proceedings are a fundamental attribute of
workplace arbitration. See also Gilmer, 500 U.S. at 32 (noting that employer's
arbitration rules also provide for collective proceedings). 15
15
The dissent suggests that employee-claimants could act in concert by simply
hiring the same lawyers. This is not what the NLRA contemplates by the term
concert. An employer could not, for example, require its employees to sign a
pledge not to join a union but remain in conformity with the NLRA by suggesting that
employees hire similar attorneys to represent them in wage negotiations. See also
City Disposal Sys., 465 U.S. at 834-35 (discussing the term concert in federal labor
law at the time of the NLRA's passage).

Third, the enforcement defense in this case does not specially disfavor arbitration.
The dissent makes dire predictions about the future
Page 1469
of workplace arbitration if the separate proceedings clause is invalidated. However,
our holding is not that arbitration may not be used in workplace disputes. Quite the
contrary. Rather, our holding is simply that when arbitration or any other mechanism
is used exclusively, substantive federal rights continue to apply in those proceedings.
The only role arbitration plays in today's case is that it happens to be the forum the
Ernst & Young contract specifies as exclusive. The contract here would face the same
NLRA troubles if Ernst & Young required its employees to use only courts, or only rolls
of the dice or tarot cards, to resolve workplace disputesso long as the exclusive
forum provision is coupled with a restriction on concerted activity in that forum. At its
heart, this is a labor law case, not an arbitration case.
Further, nothing in the Supreme Court's recent arbitration case law suggests that a
party may simply incant the acronym FAA and receive protection for illegal contract
terms anytime the party suggests it will enjoy arbitration less without those illegal
terms. We have already held that Concepcion supports no such argument:
The Supreme Court's holding that the FAA preempts state laws having a
disproportionate impact on arbitration cannot be read to immunize all arbitration
agreements from invalidation no matter how unconscionable they may be, so long as
they invoke the shield of arbitration. Our court has recently explained the nuance:
Concepcion outlaws discrimination in state policy that is unfavorable to arbitration.
Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 927 [21 WH Cases2d 767] (9th Cir.
2013) (quoting Mortensen v. Bresnan Commc'ns, LLC, 722 F.3d 1151, 1160 (9th Cir.
2013)). Do not be misled. Arbitration is consistent with, and encouraged by, the NLRA
following today's opinion.
At bottom, the distinguishing features of today's case are simple. The NLRA
establishes a core right to concerted activity. Irrespective of the forum in which
disputes are resolved, employees must be able to act in the forum together. The
structure of the Ernst & Young contract prevents that. Arbitration, like any other
forum for resolving disputes, cannot be structured so as to exclude all concerted
employee legal claims. As the Supreme Court has instructed, when private contracts
conflict with the NLRA, they obviously must yield or the Act would be reduced to a
futility. J.I. Case, 321 U.S. at 337. 16
16
We recognize that our sister Circuits are divided on this question. We agree with
the Seventh Circuit, the only one that has engaged substantively with the relevant
arguments. Epic Sys., 823 F.3d at 1159; but see Murphy Oil II, 808 F.3d at 1018
(enforcing employer's concerted action waiver under the FAA); Sutherland v. Ernst &
Young LLP, 726 F.3d 290, 297 n.8 [20 WH Cases2d 1866] (2d Cir. 2013); Owen v.
Bristol Care, Inc., 702 F.3d 1050, 1053-54 [20 WH Cases2d 24] (8th Cir. 2013).
III
In sum, the separate proceedings provision of the Ernst & Young contract interferes
with a substantive federal right protected by the NLRA's 7. The NLRA precludes
contracts that foreclose the possibility of concerted work-related legal claims. An
employer may not condition employment on the requirement that an employee sign
such a contract.
It is well established that a federal court has a duty to determine whether a
contract violates the law before enforcing it. Kaiser Steel Corp. v. Mullins, 455 U.S.
72, 83 [109 LRRM 2268] (1982). Because the district court's order compelling
arbitration was based, at least in part, on the separate proceedings provision, we
must vacate the order and remand to the district court to determine whether the
separate proceedings clause is severable from the contract. We take no position on
whether arbitration may ultimately be required in this case.
In addition, because the contract's conflict with the NLRA is determinative, we need
notand do notreach plaintiff's alternative arguments regarding the Norris

LaGuardia Act, the FLSA, or whether Ernst & Young waived its right to arbitration. 17
17
Putative-amici labor scholars motion for leave to file an amicus brief is denied. See
Fed. R. App. P. 29(e). The motion for judicial notice of additional authorities is also
denied. See Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 F.3d 936, 940 n.2
(9th Cir. 2011).
REVERSED AND REMANDED.
Dissenting Opinion Text
Dissent By:
IKUTA, Circuit Judge, dissenting.
Page 1470
Today the majority holds that 7 of the National Labor Relations Act (NLRA) precludes
employees from waiving the right to arbitrate their disputes collectively, thus striking
at the heart of the Federal Arbitration Act's (FAA) command to enforce arbitration
agreements according to their terms. This decision is breathtaking in its scope and in
its error; it is directly contrary to Supreme Court precedent and joins the wrong side
of a circuit split. I dissent.
I
The plaintiffs in this case, Stephen Morris and Kelly McDaniel, entered into an
agreement with Ernst & Young that included a program for resolving covered
disputes. The parties agreed that the program was the sole method for resolving
disputes within its coverage. Under the program, the parties agreed they would first
try to resolve a covered dispute by mediation. If that failed, either party could choose
to proceed to binding arbitration. The agreement set forth the applicable procedures.
Subparagraph K provided:
Separate Proceedings. If there is more than one Covered Dispute between the Firm
and an Employee, all such Covered Disputes may be heard in a single proceeding.
Covered Disputes pertaining to different Employees will be heard in separate
proceedings.
As the Supreme Court has explained, such a waiver of class actions is typical in the
arbitration context because the class procedural mechanism interferes with
fundamental attributes of arbitration and thus creates a scheme inconsistent with the
FAA. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011). Among other
problems, there is little incentive for lawyers to arbitrate on behalf of individuals
when they may do so for a class and reap far higher fees in the process. Id. at 347.
Class mechanisms also eviscerate the principal benefits of arbitration speed and
informality, mak[ing] the process slower, more costly, and more likely to generate
procedural morass than final judgment. Id. at 348.
Notwithstanding the agreement to arbitrate, Morris brought a complaint in federal
district court alleging that Ernst & Young had violated the Fair Labor Standards Act
(FLSA) and analogous state law by improperly classifying him and other employees
as exempt employees who were not entitled to overtime wages. (McDaniel was later
added as a plaintiff.) Morris purported to bring the action as a class action under Rule
23 of the Federal Rules of Civil Procedure and as a collective action under 29 U.S.C.
216(b) of the FLSA. 1 After some procedural complications not relevant here, Ernst &
Young moved to compel arbitration under its agreement. Morris argued that the
Separate Proceedings clause of his agreement violated 7 of the NLRA. The district
court rejected this argument. In reversing, the majority holds that employees may
not be required to waive the use of a class action mechanism in arbitrating or
litigating their claims. To the extent the Supreme Court has held that class actions are
inconsistent with arbitration, see Concepcion, 563 U.S. at 344, the majority
effectively cripples the ability of employers and employees to enter into binding
agreements to arbitrate.
1
Section 216(b) provides a class action mechanism similar to that contemplated by
Rule 23, although it requires voluntary opt in by the members of the class. It states,

in pertinent part:
An action to recover the liability prescribed in [ 216(b)] may be maintained against
any employer (including a public agency) in any Federal or State court of competent
jurisdiction by any one or more employees for and in behalf of himself or themselves
and other employees similarly situated. No employee shall be a party plaintiff to any
such action unless he gives his consent in writing to become such a party and such
consent is filed in the court in which such action is brought. 29 U.S.C. 216(b).
II
Under the FAA, agreements to arbitrate 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; Concepcion, 563 U.S. at 339. As the Supreme Court has repeatedly
explained, the FAA was enacted to overcome widespread judicial hostility to
arbitration agreements. Concepcion, 563 U.S. at 339. The Supreme Court's cases
have repeatedly described the Act as embod[ying] [a] national policy favoring
arbitration and a liberal federal policy favoring arbitration agreements. Id. at 346
(internal quotation marks and citations omitted). The FAA's national policy applies to
the states, see, e.g.,Southland Corp. v. Keating, 465 U.S. 1, 10 (1984), and forecloses
any state statute or common law rule that attempts to undercut the enforceability of
arbitration
Page 1471
agreements, id. at 16, unless the savings clause in 2 is applicable, see Concepcion,
563 U.S. at 344; Perry v. Thomas, 482 U.S. 483, 492 n.9 [28 WH Cases 137] (1987).
Therefore, when a party claims that a state law prevents the enforcement of an
arbitration agreement, the court must determine whether that law is preempted by
the FAA or is rescued from preemption by the FAA's savings clause. See Concepcion,
563 U.S. at 339-42.
But when a party claims that a federal statute makes an arbitration agreement
unenforceable, the Supreme Court takes a different approach. In determining
whether the FAA's mandate requiring courts to enforce agreements to arbitrate
according to their terms has been overridden by a different federal statute, the
Supreme Court requires a showing that such a federal statute includes an express
contrary congressional command. CompuCredit Corp. v. Greenwood, 132 S.Ct. 665,
669 (2012) (internal quotation marks omitted). The burden is on the party
challenging the arbitration agreement to show that Congress expressly intended to
preclude a waiver of the judicial forum. Gilmer v. Interstate/Johnson Lane Corp., 500
U.S. 20, 26 [55 FEP Cases 1116] (1991). If such an intention exists, it will be
discoverable in the text of the [federal act], its legislative history, or an inherent
conflict between arbitration and the [federal act's] underlying purposes. Id.
Throughout such an inquiry, it should be kept in mind that questions of arbitrability
must be addressed with a healthy regard for the federal policy favoring arbitration.
Id. (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983)).
Contrary to the majority's focus on whether the NLRA confers substantive rights, in
every case considering a party's claim that a federal statute precludes enforcement
of an arbitration agreement, the Supreme Court begins by considering whether the
statute contains an express contrary congressional command that overrides the
FAA. See, e.g.,Am. Express Co. v. Italian Colors Rest., 133 S.Ct. 2304, 2309 (2013);
CompuCredit, 132 S.Ct. at 669, Gilmer, 500 U.S. at 29. 2 To date, in every case in
which the Supreme Court has conducted this analysis of federal statutes, it has
harmonized the allegedly contrary statutory language with the FAA and allowed the
arbitration agreement at issue to be enforced according to its terms. 3 Thus in
CompuCredit, the Court considered a purported contrary congressional command
in the Credit Repair Organization Act (CROA), 15 U.S.C. 1679 et seq., which the
plaintiffs claimed precluded consumers from entering an arbitration agreement that
waived their right to litigate an action in a judicial forum. 132 S.Ct. at 669. The

plaintiffs pointed to the language in CROA that required a business to tell a consumer
that [y]ou have a right to sue, 15 U.S.C. 1679c(a), that provided for actual and
punitive damages in both individual legal actions and class actions, id. 1679g, and
that provided that [a]ny waiver by any consumer of any protection provided by or
any right of the consumer was void and could not be enforced by any Federal or
State court, id. 1679f(a).
2
The Supreme Court has applied the same approach, and reached the same
conclusion, in upholding a collective bargaining agreement with a mandatory
arbitration clause governed by the NLRA. See 14 Penn Plaza LLC v. Pyett, 556 U.S.
247, 265-74 [105 FEP Cases 1441] (2009).
3
Only Wilko v. Swan held that the Securities Act of 1933 contained an unwaivable
right to a judicial forum for claims under the Act, thereby precluding the enforcement
of an arbitration agreement between parties to a sale of securities. 346 U.S. 427,
432-37 (1953). But the Court expressly overruled Wilko in Rodriguez de Quijas v.
Shearson/Am. Express, Inc., rejecting its reasoning as pervaded by the old judicial
hostility to arbitration. 490 U.S. 477, 480 (1989) (internal quotation marks omitted);
see also Pyett, 556 U.S. at 266-67.
The Supreme Court rejected this claim. Overruling the Ninth Circuit, the Court held
that had Congress meant to prohibit arbitration clauses, it would have done so in a
manner less obtuse than what respondents suggest. CompuCredit, 132 S.Ct. at 672.
According to the Court, when Congress wants to restrict the use of arbitration it has
done so with a clarity that far exceeds the claimed indications in the CROA. Id. The
Supreme Court gave two examples of what would constitute a sufficiently clear
contrary congressional command:
No predispute arbitration agreement shall be valid or enforceable, if the agreement
requires arbitration of a dispute arising under this section. Id. (quoting 7 U.S.C.
26(n)(2) (2006 ed., Supp. IV)).
Notwithstanding any other provision of law, whenever a motor vehicle franchise
contract provides for the use of arbitration to resolve a controversy arising out of or
relating
Page 1472
to such contract, arbitration may be used to settle such controversy only if after such
controversy arises all parties to such controversy consent in writing to use arbitration
to settle such controversy. Id. (quoting 15 U.S.C. 1226(a)(2) (2006 ed.)).
Because the language in the two CROA provisions cited by plaintiffs did not expressly
state that a predispute arbitration agreement was unenforceable, the Court
determined that they were consistent with enforcement of an arbitration agreement.
The right to sue language, for instance, merely allowed parties to enter into an
agreement requiring initial arbitral adjudication, which then could be reviewed in a
court of law. Id. at 670-71. Because the CROA was silent on whether claims under
the Act can proceed in an arbitrable forum, the Court held that the FAA requires the
arbitration agreement to be enforced according to its terms. Id. at 673.
In Gilmer, plaintiffs claimed the Age Discrimination in Employment Act of 1967
(ADEA) contained a contrary congressional command to the FAA's mandate. 500 U.S.
at 27-30. Specifically, the plaintiffs pointed to language allowing employees to litigate
in court as providing an unwaivable right to access a judicial forum: [a]ny person
aggrieved may bring a civil action in any court of competent jurisdiction for such
legal or equitable relief as will effectuate the purpose of this chapter, 29 U.S.C.
626(c)(1); Gilmer, 500 U.S. at 27. They also pointed to language they claimed
precluded employees from waiving the right to bring a class action: The provisions
of this chapter shall be enforced in accordance with the powers, remedies, and
procedures provided in section 216, 29 U.S.C. 626(b), where 216(b) (also at
issue here) states that an action under the FLSA may be brought in court by any one
or more employees for and in behalf of himself or themselves and other employees
similarly situated, although the represented employees must consent. In other

words, the plaintiffs argued that because the ADEA explicitly provided for a class
mechanism, the statute precluded the enforcement of an arbitration agreement that
included a class action waiver.
The Supreme Court rejected this argument. Once again, the statutory language was
not sufficiently clear to prevent the enforcement of arbitration agreements that
included a class action waiver. Looking closely at the text of the statute, the Court
noted that while Congress allowed for judicial resolution of claims, it did not
explicitly preclude arbitration or other nonjudicial resolution of claims. Gilmer, 500
U.S. at 27-29. Moreover, the fact that the [ADEA] provides for the possibility of
bringing a collective action does not mean that individual attempts at conciliation
were intended to be barred. Id. at 32. Thus, the language on which the plaintiffs
relied was entirely consistent with enforcing an arbitration agreement that precluded
a class mechanism. See also Italian Colors, 133 S.Ct. at 2311 (In Gilmer we had
no qualms in enforcing a class waiver in an arbitration agreement even though the
federal statute at issue expressly permitted collective actions.). Turning to the
ADEA's legislative history, the Supreme Court found nothing showing a congressional
intention to preclude waiver of a judicial forum. Gilmer, 500 U.S. at 29. Indeed, the
Court found in the ADEA a flexible approach to resolution of claims and other
indicia that Congress did not intend to preclude individual arbitration of disputes. Id.
at 29-31.
Finally, in Italian Colors, there was a purported inherent conflict, Gilmer, 500 U.S. at
26, between arbitration and the policies underlying the Sherman and Clayton Acts,
133 S.Ct. at 2310-12. According to plaintiffs, the cost of individually arbitrating their
antitrust claims would so far exceed the potential recovery that requiring them to
litigate their claims individually would render the plaintiffs unable to vindicate their
federal statutory rights. Id. The Supreme Court rejected this argument. Examining the
text of the acts, the Court noted that the federal acts make no mention of class
actions, and were enacted decades before the advent of Federal Rule of Civil
Procedure 23. Id. at 2309. The Court gave even less weight to the plaintiffs policy
arguments. With respect to the argument that federal law secures a nonwaivable
opportunity to vindicate federal policies by satisfying the procedural strictures of Rule
23 or invoking some other informal class mechanism in arbitration, the Court simply
stated that we have already rejected that proposition in Concepcion. Id. at 2310. In
Concepcion, the Court made clear that the FAA allows parties to waive the use of a
class mechanism because such a mechanism interferes with fundamental attributes
of arbitration. 563 U.S. at 344.
Page 1473
In sum, the Supreme Court consistently rejects claims that a contrary congressional
command precludes courts from enforcing arbitration agreements according to their
terms, including when such agreements waive the use of class mechanisms. In
analyzing such arguments, the Court has focused primarily on a single question:
whether the text of the federal statute at issue expressly precludes the use of a
predispute arbitration agreement for the underlying claims at issue. If the statute
does not, the Court's healthy regard for the federal policy favoring arbitration,
Moses H. Cone, 460 U.S. at 24, leads it to conclude that there is no such contrary
command, and the Court reads the purportedly contrary federal statute to allow the
enforcement of the agreement to arbitrate. The Court has likewise rejected claims
that the legislative history or policy of the federal statute requires a different result.
See Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 89-90 (2000) (noting that the
Court has rejected generalized attacks on arbitration that rest on suspicion of
arbitration as a method of weakening the protections afforded in the substantive law
to would-be complainants. (quoting Rodriguez de Quijas v. Shearson/Am. Express,
Inc., 490 U.S. 477, 481 (1989))).
III
Here, the majority ignores the thrust of Supreme Court precedent and declares that

arbitration is precluded because it interferes with a substantive right protected by 7

and 8 of the NLRA. 4 Section 7 states:
4
Although the majority cites Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467
U.S. 837 (1984), it does not defer to the NLRB's interpretation of 7 as overriding the
command of the FAA in In re D.R. Horton v. NLRB, 357 NLRB No. 184 [192 LRRM
1137] (2012), which was subsequently overruled by the Fifth Circuit. See D.R. Horton
v. NLRB, 737 F.3d 344 [197 LRRM 2637] (5th Cir. 2013). Rather, the majority states
that the NLRA is unambiguous, and there is no need to proceed to the second step
of Chevron. Maj. Op. at 13.
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.
29 U.S.C. 157. Section 8 merely makes it an unfair labor practice for an employer
to interfere with, restrain, or coerce employees in the exercise of the rights
guaranteed in [ 7]. 29 U.S.C. 158(a).
A
Nothing in this language comes remotely close to the examples of contrary
congressional commands the Supreme Court identified in CompuCredit, where
Congress expressly stated that [n]o predispute arbitration agreement shall be valid
or enforceable. 132 S.Ct. at 672. The language of 7 and 8 of the NLRA neither
mention arbitration nor specify the right to take legal action at all, whether
individually or collectively. See Italian Colors, 133 S.Ct. at 2309 (The Sherman and
Clayton Acts make no mention of class actions.). Applying Supreme Court precedent,
we must conclude there is no contrary congressional command in the text of the
NLRA.
Moreover, contrary to the majority, Maj. Op. at 6, nothing in either 7 or 8 creates a
substantive right to the availability of class-wide claims that might be contrary to the
FAA's mandate. While the NLRA protects concerted activity, it does not give
employees an unwaivable right to proceed as a group to arbitrate or litigate disputes.
Rather, as in CompuCredit and Gilmer, the language can be harmonized with
enforcement of an arbitration agreement that waives class action mechanisms.
According to a dictionary roughly contemporaneous with the passage of the NLRA,
concerted action is action that is mutually contrived or planned: agreed on.
Webster's International Dictionary of the English Language 295 (1903 ed.). A natural
reading of 7's right to engage in other concerted activities for the purpose of
collective bargaining or other mutual aid or protection enables employees to jointly
arrange, plan, and carry out group efforts to dispute employer positions. In a legal
context, this could include joint legal strategies, shared arguments and resources,
hiring the same attorneys, or even requesting the Department of Labor to bring an
independent action against the employer. But the language does not expressly
preserve any right for employees to use a specific procedural mechanism to litigate
or arbitrate disputes collectively; even less does it create an unwaivable right to such
mechanism. Indeed, the text provides no basis for the majority's conclusion that 7
gives employees a substantive, unwaivable right to
Page 1474
use Rule 23, 216(b) of the FLSA, or any other procedural mechanism that might be
available for bringing class-wide actions. 5 Accordingly, the Supreme Court's
precedent compels the conclusion that neither 7 nor 8 contains a contrary
congressional command that precludes enforcing Morris's arbitration agreement
according to its terms. If this were not the case, the Court's statement that Gilmer
had no qualms in enforcing a class waiver in an arbitration agreement even though
the federal statute at issue, the Age Discrimination in Employment Act, expressly
permitted collective actions, Italian Colors, 133 S.Ct. at 2311, would be meaningless.
Under the majority's reasoning, regardless whether a class action waiver survives

express language in the ADEA, as Gilmer held, the waiver nevertheless is

unenforceable in every action by an employee against an employer due to the
unwaivable right to class procedures in the NLRA.
5
The majority claims that Eastex, Inc. v. NLRB, 437 U.S. 556, 566 [98 LRRM 2717]
(1978), conclusively supports its view that 7 of the NLRA includes a substantive
right to class action procedures. Maj. Op. at 10-11 n.3. This is incorrect. The Court
declined to delineate the rights that are provided by 7 in an administrative or
judicial forum, stating: We do not address here the question of what may constitute
concerted activities in this context. Eastex, Inc., 437 U.S. at 566 n.15.
Nor does the legislative history of the NLRA demonstrate an intent to preclude
individual resolution of disputes. The NLRA was enacted decades before Rule 23
created the modern class action in 1966. As the Fifth Circuit observed, in enacting the
NLRA Congress did not discuss the right to file class or consolidated claims against
employers, and therefore the legislative history also does not provide a basis for a
congressional command to override the FAA. D.R. Horton, Inc. v. NLRB, 737 F.3d 344,
361 [197 LRRM 2637] (5th Cir. 2013). The majority does not cite any legislative
history to the contrary.
Finally, there is no inherent conflict between arbitration and the underlying
purposes of the NLRA. Gilmer, 500 U.S. at 26. The majority argues that the very
purpose of the NLRA is to enable employees to engage in concerted activity, and
therefore, it necessarily also has the purpose of enabling employees to engage in
collective legal activity, including class actions. Maj. Op. at 9-10. Even assuming that
concerted action is the basic tenet of federal labor policy, id. at 10, nothing in the
NLRA suggests that this protection includes the right to resolve disputes using a
particular legal procedure. The majority's attempt to equate a substantive right to
concerted action with a legal procedural mechanism for resolving disputes has no
basis in history or Supreme Court precedent. To the contrary, the Court has held that
the right of a litigant to employ Rule 23 is a procedural right only, ancillary to the
litigation of substantive claims. Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 332
(1980). Moreover, as the Fifth Circuit pointed out, there is limited force to the
argument that there is an inherent conflict between the FAA and NLRA when the
NLRA would have to be protecting a right of access to a procedure that did not exist
when the NLRA was (re)enacted. D.R. Horton, 737 F.3d at 362. Indeed, as the
majority acknowledges, federal labor policy favors and promotes arbitration. Maj.
Op. at 16 (emphasis added). See United Steelworkers of Am. v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 578 [46 LRRM 2416] (1960) ([A]rbitration of labor
disputes under collective bargaining agreements is part and parcel of the collective
bargaining process itself.); Pyett, 556 U.S. at 257 (Parties generally favor arbitration
precisely because of the economics of dispute resolution.).
In sum, nothing in the text, legislative history, or purposes of 7 precludes
enforcement of an arbitration agreement containing a class action waiver.
B
In order to avoid this conclusion, the majority disregards the Supreme Court's
guidance, and instead conflates the question whether the FAA's mandate has been
overridden by a contrary congressional command, CompuCredit, 132 S.Ct. at 669
(internal quotation marks omitted), with the question whether an employee's
agreement to arbitrate individually is invalid under the FAA's savings clause, 9 U.S.C.
2 (providing that an agreement to arbitrate shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of
any contract). The majority reasons that: (1) the Separate Proceedings
requirement in Morris's contract that all disputes must be resolved individually is
illegal because it violates the NLRA; (2) a party may raise a defense that a contract
provision is illegal, and
Page 1475
such a defense is generally applicable and not related specifically to arbitration

agreements; and therefore (3) in response to Ernst & Young's motion to compel
arbitration, Morris's defense that the Separate Proceedings requirement is illegal is
preserved by the FAA's savings clause. In adopting this line of reasoning, the majority
joins the Seventh Circuit (the only circuit with which the majority agrees). See Lewis
v. Epic Sys. Corp., 832 F.3d 1147, 2016 WL 3029464 [26 WH Cases2d 795] (7th
Cir. 2016) (holding that 7 of the NLRA mandates collective legal action for
employees, and therefore an arbitration agreement waiving such collective legal
action is illegal and thus unenforceable under the FAA's savings clause.)
This reasoning is contrary to the Supreme Court's FAA jurisprudence. Maj. Op. at 1417. First, the Supreme Court does not apply the savings clause to federal statutes;
rather, it considers whether Congress has exercised its authority to override the FAA's
mandate to enforce arbitration agreements according to their terms. See
CompuCredit, 132 S.Ct. at 669. If there is no contrary congressional command, i.e.,
an express statement such as [n]o predispute arbitration agreement shall be valid or
enforceable, id., then the Supreme Court will conclude that the federal statute at
issue can be harmonized with the FAA. Second, the majority's reasoning is specious
because it is based on the erroneous assumption that the waiver of the right to use a
collective mechanism in arbitration or litigation is illegal. But such a waiver would
be illegal only if it were precluded by a contrary congressional command in the
NLRA, and here there is no such command.
Moreover, even if the FAA's savings clause were applicable to a federal statute, the
majority's construction of 7 and 8 of the NLRA as giving employees a substantive,
nonwaivable right to classwide actions would not be saved under that clause. As
Concepcion explained, such a purported right would disproportionately and
negatively impact arbitration agreements by requiring procedures that interfere[]
with fundamental attributes of arbitration. Concepcion, 563 U.S. at 344. Because
class procedures are generally incompatible with arbitration, id. at 351, and
nothing in [the FAA's savings clause] suggests an intent to preserve [defenses] that
stand as an obstacle to the accomplishment of the FAA's objectives, such rules do
not fall within the confines of the savings clause, id. at 343. The majority's argument
that the nonwaivable right to class-wide procedures it has discerned in 7 applies
equally to arbitration and litigation and so is saved by the 2 savings clause, Maj. Op.
at 16-17, was expressly rejected in Concepcion, see 563 U.S. at 338 (rejecting
plaintiffs argument that a state rule prohibiting class action waivers in adhesion
contracts applied equally to judicial and arbitral proceedings and thus fit the 2
savings clause).
The majority's erroneous reasoning leads to a result that is directly contrary to
Congress's goals in enacting the FAA. Given that lawyers are unlikely to arbitrate on
behalf of individuals when they can represent a class, see id., 563 U.S. at 347, and an
arbitrator cannot hear a class arbitration unless such a proceeding is explicitly
provided for by agreement, Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662,
684 (2010), the employee's purported nonwaivable right to class-wide procedures
virtually guarantees that a broad swath of workplace claims will be litigated,
Concepcion, 563 U.S. at 347. The majority's reasoning is likewise contrary to the
Supreme Court's ruling that collective actions are not necessary to protect
employees federal statutory rights. See Gilmer, 500 U.S. at 32; see also Circuit City
Stores, Inc. Adams, 532 U.S. 105, 123 [85 FEP Cases 266] (2001) (We have been
clear in rejecting the supposition that the advantages of the arbitration process
somehow disappear when transferred to the employment context.).
IV
The Second, Fifth, and Eight Circuits have concluded that the NLRA does not
invalidate collective action waivers in arbitration agreements. See Cellular Sales of
Missouri, LLC v. NLRB, 824 F.3d 772, 2016 WL 3093363, at *2 [206 LRRM 3362] (8th
Cir. 2016); D.R. Horton, 737 F.3d at 362; Sutherland v. Ernst & Young LLP, 726 F.3d
290, 297 n.8 [20 WH Cases2d 1866] (2d Cir. 2013). These decisions are consistent

with Supreme Court precedent, which has made it abundantly clear that arbitration
agreements must be enforced according to their terms unless Congress has given an
express contrary command.
In teasing out of the NLRA a mandate that prevents the enforcement of Morris's
arbitration agreement, the majority exhibits the
Page 1476
very hostility to arbitration that the FAA was passed to counteract. The Court
recognized in Concepcion that the pre-FAA judicial antagonism to arbitration
agreements manifested itself in a great variety of devices and formulas declaring
arbitration against public policy. 563 U.S. at 342 (quoting Robert Lawrence Co. v.
Devonshire Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959)). Today the majority invents
a new such formula. Because I would follow the Supreme Court precedent and join
the majority of the circuits concluding that 7 of the NLRA does not prevent the
collective action waiver at issue here, I would hold that Morris's contract must be
enforced according to its terms. I therefore dissent.
- End of Case -