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NLRB v. Murphy Oil

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Supreme Court of the United States
NLRB v. Murphy Oil
Term: 2017
Important Dates
Argument: October 2, 2017
Decided: May 21, 2018
Outcome
Fifth Circuit affirmed
Vote
5 - 4 to affirm
Majority
Neil Gorsuch • Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Samuel Alito Concurring = Clarence Thomas
Dissenting
Ruth Bader Ginsburg • Stephen Breyer • Sonia Sotomayor • Elena Kagan


National Labor Relations Board v. Murphy Oil USA, Inc. is a case argued during the October 2017 term of the U.S. Supreme Court. Argument in the case was held on October 2, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the 5th Circuit. The court consolidated arguments in the case with arguments in Epic Systems Corporation v. Lewis and Ernst and Young v. Morris.


HIGHLIGHTS
  • The case: In November of 2008, as a condition of employment with Murphy Oil USA, Inc., an employee was required to sign an arbitration agreement with the company. The agreement contained a provision waiving the employee's right to pursue work-related claims through a class or collective action in any forum and, instead, compelled the employee to pursue such claims against the company solely through individual arbitration. The employee later filed a class action lawsuit against the company claiming the waiver violated the National Labor Relations Act. In a separate proceeding, the National Labor Relations Board ruled that such waivers violated the National Labor Relations Act, contradicting the judgment of the Fifth Circuit Court of Appeals. Though the Fifth Circuit held that Murphy's agreement with the employee violated the National Labor Relations Act because an employee could reasonably construe the agreement's language as preventing an employee from filing unfair labor charges against the company, the court reaffirmed its position that class or collective action waivers in arbitration agreements did not violate the National Labor Relations Act.
  • The issue: Can an employer prohibit employees from pursuing work-related claims in a class or collective action?
  • The outcome: The Supreme Court affirmed the Fifth Circuit, holding that under the Arbitration Act, agreements to arbitrate must be enforced.[1]


    • In brief: In subsequent cases, the Seventh Circuit and Ninth Circuit held the waiver did violate the National Labor Relations Act, creating a split among federal circuit courts. Argument in the case was held on October 2, 2017.

    You can review the lower court's opinion here.[2]
    Here are our pages on the consolidated cases: Epic Systems Corporation v. Lewis and Ernst and Young v. Morris.

    Background

    In November of 2008, Sheila Hobson began working for a retail gas station operated by Murphy Oil USA, Inc. (hereafter, Murphy Oil), in Calera, Alabama. At that time, Hobson signed an arbitration agreement with Murphy Oil. The agreement contained a provision waiving Hobson's right to pursue work-related claims through a class or collective action in any forum and, instead, compelled Hobson to pursue such claims against the company solely through individual arbitration. In June of 2010, Hobson and three other employees filed a lawsuit in federal district court against Murphy Oil alleging violations of the Fair Labor Standards Act. Murphy Oil filed a motion to dismiss the lawsuit and to compel the parties to arbitration pursuant to the agreement signed by Hobson and her fellow employees. While Murphy Oil's motion to dismiss was pending, Hobson filed an unfair labor charge against Murphy Oil with the National Labor Relations Board (hereafter, Board) in January of 2011. Hobson alleged that the arbitration agreement violated Section 7 of the National Labor Relations Act (hereafter, NLRA) because the agreement deprived her of the opportunity to engage in protected collective action against her employer. The Board's general counsel issued a complaint and notice of hearing to Murphy Oil in March of 2011.

    In January of 2012, the Board held in a separate case, D.R. Horton, Inc., that an employer violates Section 7 of the NLRA when the employer requires an employee to sign an arbitration agreement containing a class or collective action waiver, and that this violates an employee's rights to engage in such activity under Section 8(a)(1) of the NLRA. The Board further ruled that the waiver's language could be reasonably construed to prevent employees from bringing unfair labor charges against the company to the Board, which also violated Section 8(a)(1). In March of 2012, following the Board's decision in Horton, Murphy Oil implemented a revised form of their arbitration agreement which applied to all employees hired after March of 2012. The modified agreement stipulated that the agreement did not prevent or preclude employees from filing unfair labor charges with the Board, however, because Hobson and her fellow employees were hired before March of 2012, the revised agreement did not cover their complaints.

    In September of 2012, the Alabama court issued a judicial stay of the collective action filed by Hobson and her employees and compelled the parties to arbitration consistent with the agreement in place at the time of the employees' hiring. In October of 2012, the Board amended Hobson's charges to include Murphy Oil's motion to dismiss and to compel arbitration as violative of Section 8(a)(1) of the NLRA. Meanwhile, in December of 2013, the United States Court of Appeals for the 5th Circuit ruled in D.R. Horton, Inc. v. NLRB that the Board's conclusion that Horton's arbitration agreement containing a class action waiver violated the NLRA was wrong. The Fifth Circuit held that,[2]

    “

    the NLRA does not contain a 'congressional command overriding' the Federal Arbitration Act ('FAA'); and (2) 'use of class action procedures ... is not a substantive right' under Section 7 of the NLRA. ... 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.[3]

    		”

    In October of 2014, contrary to the Fifth Circuit's ruling in Horton, the Board held that Murphy Oil's requirement to waive collective action in favor of individual arbitration violated Section 7 employee rights under the NLRA as well as Section 8(a)(1) of the NLRA. While action in the Alabama cases was still pending, Murphy Oil filed an appeal before the Fifth Circuit of the Board's decision.[4]

    Writing for a unanimous three-judge circuit panel composed of Judges Leslie Southwick, Edith Jones, and Jerry E. Smith, Judge Southwick held that Murphy Oil's arbitration agreement in place prior to March of 2012 violated the NLRA because the agreement's language could have been reasonably construed by employees to read that the waiver included both a judicial waiver and an administrative waiver, the latter of which would prevent an employee from pursuing an unfair labor charge against the company before the Board. This provision, the court held, violated Section 8(a)(1) of the NLRA.

    With respect to the modified agreement, issued in March of 2012, the circuit panel held that it would be unreasonable for an employee to believe, based on the modified language, that the agreement prevented an employee from filing an unfair labor charge against the company before the Board. The court declined to enforce the Board's decision with respect to the modified agreement.

    Importantly for the litigation before the U.S. Supreme Court, the circuit panel reaffirmed its judgment that mandatory class or collective action waivers in arbitration agreements did not violate the NLRA.

    Change in the government's position

    On September 9, 2016, the National Labor Relations Board (hereafter, Board) filed a petition to appeal the circuit panel's judgment before the U.S. Supreme Court. The Board indicated in its petition that it would argue that class or collective action waivers in arbitration agreements violated the NLRA. Subsequent to the filing of that petition, but prior to the Supreme Court agreeing to hear the appeal, Donald Trump (R) won the 2016 presidential election. As a result, leadership within the U.S. Department of Justice changed with the change in administrations.

    On June 16, 2017, the Board released the following statement on its website,[5]

    “

    Today, the Acting Solicitor General of the United States authorized the National Labor Relations Board to represent itself in the Supreme Court case of NLRB v. Murphy Oil USA, Inc., No. 16-307. The Supreme Court granted certiorari in the Murphy Oil case on January 13, 2017, along with two other cases, Epic Systems Corporation v. Jacob Lewis and Ernst and Young LLP, et al. v. Stephen Morris. The three cases present the question of whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violate the National Labor Relations Act.[3]

    		”

    Amy Howe, writing in SCOTUSBlog.com, noted that in June of 2017, after certiorari was granted, "the United States filed a 'friend of the court' brief supporting the employers. ... Acting Solicitor General Jeffrey Wall acknowledged that his office had previously filed a petition on behalf of the NLRB, 'defending the Board’s view that agreements of the sort at issue here are unenforceable.' But, Wall continued, 'since the change in administration, the Office reconsidered the issue and has reached the opposite conclusion.' In particular, Wall explained, the NLRB had not given 'adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the' Federal Arbitration Act. ... the NLRB is likely to file its own brief, reiterating its original position in the case, in early August. And if the United States seeks and receives permission to argue in the case, as it virtually always does in cases in which it files 'friend of the court' briefs, a lawyer for the United States would argue against a lawyer for a U.S. agency – a phenomenon perhaps even more uncommon than a change in position following a change in administration."[6]

    Petitioner's challenge

    The National Labor Relations Board, the petitioner, challenged the holding of the Fifth Circuit. The Board argued that, for work-related claims, Murphy Oil USA's requirement compelling employees to waive class or collective action in favor of individual arbitration violates Sections 7 and 8(a)(1) of the National Labor Relations Act.

    Certiorari granted

    On September 9, 2016, the National Labor Relations Board, the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the Fifth Circuit. The U.S. Supreme Court granted the Board's certiorari request on January 13, 2017, consolidating arguments in the case with arguments in Epic Systems Corporation v. Lewis and Ernst and Young v. Morris. Argument in the case was held on October 2, 2017.[7]

    Question presented

    Question presented:

    "Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees' right under the National Labor Relations Act to engage in concerted activities in pursuit of their mutual aid or protection, 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2."[7]

    Audio

    • Audio of oral argument:[8]



    Transcript

    • Transcript of oral argument:[9]

    Outcome

    Decision

    On a vote of 5 - 4, the Supreme Court affirmed the Fifth Circuit's ruling. The Supreme Court held that under the Arbitration Act, agreements to arbitrate must be enforced.[1]

    Majority opinion

    Justice Neil Gorsuch authored the opinion for the court majority, joined by Chief Justice John Roberts and Justices Samuel Alito, Anthony Kennedy, and Clarence Thomas.

    Gorsuch began by framing what he saw as the question at the heart of the case: whether employers and employees can contract to require arbitraiton, or whether an employee may always bring a collective action regardless of an agrement to arbitrate individually. Gorsuch ruled that the Federal Arbitration Act requires courts to enforce agreements to arbitrate and that the collective bargaining rights established in the National Labor Relations Act did not contravene the FAA's enforcement requirement:

    “ As a matter of policy these questions are surely debatable. But as a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings. Nor can we agree with the employees’ suggestion that the National Labor Relations Act (NLRA) offers a conflicting command. It is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion. The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum . . Far from conflicting, the Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this Court to declare the parties’ agreements unlawful.[1][3] ”


    Gorsuch rejected the employees' arguments that the savings clause of the NLRA invalidated agreements to arbitrate in cases like this, stressing that the cause only "permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability." Gorsuch also rejected the dissent's argument that the majority had overridden Congress' intent in passing the NLRA. Gorsuch wrote, "Today's decision merely declines to read into the NLRA a novel right to class action proedures that the Board's own general counsel disclaimed as recently as 2010."[1]

    Concurrence by Justice Thomas

    Justice Clarence Thomas joined the majority opinion in full and also wrote separately. Thomas wrote, "I write separately to add that the employees also cannot prevail under the plain meaning of the Federal Arbitration Act."[1]

    Dissent by Justice Ginsburg

    Justice Ruth Bader Ginsburg dissented, joined by Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Framing the case as she saw it, Ginsburg wrote, "Does the Federal Arbitration Act (Arbitration Act or FAA) permit employers to insist that their employees, whenever seeking redress for commonly experienced wage loss, go it alone, never mind the right secured to employees by the National Labor Relations Act (NLRA) 'to engage in . . . concerted activities' for their 'mutual aid or protection'? The answer should be a resounding 'No.'"[1] She wrote:

    “ The Court ignores the reality that sparked the NLRA’s passage: Forced to face their employers without company, employees ordinarily are no match for the enterprise that hires them. Employees gain strength, however, if they can deal with their employers in numbers. That is the very reason why the NLRA secures against employer interference employees’ right to act in concert for their 'mutual aid or protection.' . . . The FAA demands no such suppression of the right of workers to take concerted action for their 'mutual aid or protection.'[1][3] ”


    Ginsburg would have concluded that the FAA does not protect contracts requiring individual arbitration because contracts to require individual arbitration violate the rights guaranteed by the NLRA and are therefore illegal. Citing earlier precedent for "the ordinarily superseding rule that 'illegal promises will not be enforced,'" she reasoned that the FAA could not allow for contracts that were illegal under other existing laws.[1]

    Text of the opinion

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 United States Supreme Court, "Epic Systems Corporation v. Lewis opinion," May 21, 2018
    2. ↑ 2.0 2.1 U.S. Court of Appeals for the Fifth Circuit, Murphy Oil USA, Incorporated v. National Labor Relations Board, October 26, 2015
    3. ↑ 3.0 3.1 3.2 3.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    4. ↑ Alabama federal courts are within the jurisdiction of the United States Court of Appeals for the 11th Circuit.
    5. ↑ National Labor Relations Board, "Statement of the National Labor Relations Board Concerning the Supreme Court Case of NLRB v. Murphy Oil USA, Inc.," June 16, 2017
    6. ↑ SCOTUSBlog.com, "Murphy Oil’s law: Solicitor General’s office reverses course in arbitration cases, supports employers," June 19, 2017
    7. ↑ 7.0 7.1 Supreme Court of the United States, NLRB v. Murphy Oil USA, Inc., January 13, 2017
    8. ↑ Supreme Court of the United States, National Labor Relations Board v. Murphy Oil, argued October 2, 2017
    9. ↑ Supreme Court of the United States, NLRB v. Murphy Oil, argued October 2, 2017
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