United States: Murphy Oil USA, Inc.: NLRB Holds On Class Action Arbitration Agreements

James Michalski is a Partner in our Los Angeles office.

NLRB Reaffirms Its 2012 D.R. Horton Ruling Despite Strong Dissent and Adverse Courts of Appeals Decisions

HIGHLIGHTS:

  • The National Labor Relations Board in Murphy Oil USA, Inc. and Sheila M. Hobson refused to back away from its controversial 2012 ruling in D.R. Horton, Inc. finding class action waivers unenforceable.
  • A clear resolution of the issue of class action waiver enforceability under the National Labor Relations Act (NLRA) likely will not occur until the U.S. Supreme Court reviews the question.

The National Labor Relations Board (Board) in Murphy Oil USA, Inc. and Sheila M. Hobson1 (Murphy Oil) refused to back away from its controversial 2012 ruling in D.R. Horton, Inc. and Michael Cuda2 (D.R. Horton) finding class action waivers unenforceable. The Board's opinion was filed on Oct. 28, 2014. Instead, a bare three-member majority reaffirmed D.R. Horton over a vigorous dissent and in defiance of adverse judicial decisions of the U.S. Courts of Appeals for the Second, Fifth and Eighth Circuits – all of which have rejected D.R. Horton. A clear resolution of the issue of class action waiver enforceability under the National Labor Relations Act (NLRA) likely will not occur until the U.S. Supreme Court reviews the question.

Factual Background About Murphy Oil Case

Murphy Oil USA, Inc. (Company) operates more than 1,000 retail fueling stations in 21 states. Prior to March 6, 2012, the Company required all job applicants and current employees, as a condition of employment, to sign a "Binding Arbitration Agreement and Waiver of Jury Trial" (Agreement) wherein they each agreed to arbitrate any employment claims individually with the Company. Importantly, and relevant to the decision, applicants and employees signing the Agreement thereby "waive" their right to commence, be a party to, or act as a class member in any class or collective action in any court action or arbitration.3

Nonetheless, four Company employees filed a federal collective action under the Fair Labor Standards Act (FLSA). The complaint alleged that the Company failed to pay overtime and pay for various required work-related activities performed off the clock, including driving to the fuel stations of competitors to monitor fuel prices and check the accuracy of their signage. In July 2010, the Company filed a motion to compel arbitration on an individual basis and to dismiss the FLSA collective action based on the Agreement. The Company continued to seek enforcement of the Agreement in approximately eight court pleadings and related filings between September 2010 and February 2012.4 In September 2012, the federal District Court granted the Company's motion to compel individual arbitration of Hobson's and the other plaintiffs' FLSA claims and ordered the lawsuit stayed pending arbitration. The plaintiffs did not appeal this decision. For its part, the Company refused to arbitrate Hobson's and the other plaintiffs' claims on a collective basis.

Procedural Background of the Board's Murphy Oil Case

In January 2011, Hobson filed an unfair labor practice charge and the Board's general counsel issued a complaint and notice of hearing in March 2011. The complaint alleged that the Company had been violating Section 8(a)(1) of the NLRA by maintaining and enforcing a mandatory arbitration agreement that prohibits employees from engaging in protected, concerted activities. Thereafter, the Company revised the Agreement to note that employees are not waiving their rights under Section 7 of the NLRA to file class or collective actions, and they are not waiving their rights to file unfair labor practices before the Board.

Despite the amendment, the Board's general counsel issued an amended complaint regarding the maintenance of the Agreement and further alleging that the Company's efforts to enforce the Agreement in federal court also violated Section 8(a)(1) of the NLRA.

Board "Doubles Down" on Its 2012 D.R. Horton Holding That Class Action Waivers Deny a Substantive Right of Employees Under the NLRA

The Board in Murphy Oil self-servingly found that despite its overwhelming rejection by federal District Courts, federal courts of appeals and the California Supreme Court, "[t]he rationale of D.R. Horton was straightforward, clearly articulated, and well supported at every step[.]"5The Murphy Oil Board reaffirmed its view that mandatory arbitration agreements barring a class or collective action "restrict the exercise of a substantive right to act concertedly for mutual aid or protection that is central to the [NLRA]." It also reaffirmed its view that holding mandatory arbitration agreements unlawful under the NLRA does not conflict with the Federal Arbitration Act (FAA).6

Board in Murphy Oil Also Dismissed Contrary Authority as Not Properly Addressing the Uniqueness of the NLRA and the Board's Role in Interpreting That Act

The Murphy Oil Board attacked the Fifth Circuit's repudiation of D.R. Horton, noting that the U.S. Supreme Court has "emphasized often that the [Board] has the primary responsibility for developing and applying national labor policy" and that the Fifth Circuit's decision "gives too little weight to this policy."7 The Board also found unpersuasive the Fifth Circuit's reasoning that the right to pursue legal claims "concertedly" is not a substantive right, but merely a procedural one subject to waiver. Instead, the Board explained that Section 7 of the NLRA "does not create procedural rights in the sense that the Fifth Circuit invoked" and mandatory arbitration agreements unlawfully purport to extinguish a substantive right to a form of concerted activity (i.e., concerted legal activity), and are invalid.8 Additionally, the Board criticized the Fifth Circuit's lack of explanation of why, "in the event of a conflict between the NLRA and the FAA, it would be the NLRA that would be required to yield."9 Finally, the Board found "troubling" the Fifth Circuit's view that the FAA's survival of the Norris-LaGuardia Act indicated its preeminence where conflicts arose with the NLRA.

As to the Second and Eighth Circuits' opinions, the Murphy Oil Board first found that the Second Circuit's decision in Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297-98 and n.8 (2nd Cir. 2013), was of little value given its "unelaborated endorsement of the Eighth Circuit's" rejection of the D.R. Horton opinion in its decision Owen v. Bristol Care, 702 F.3d 1050, 1053-54 (8th Cir. 2013). Focusing on the Eighth Circuit's opinion, the Board found that it provided "limited analysis" in its rejection of the Board's argument that the legislative history of the NLRA "indicated a congressional command to override the FAA." The Board also stated that the Eighth Circuit erred in rejecting the employees' argument based on the Norris-LaGuardia Act, which it did by observing that the 1947 decision to reenact the FAA suggested Congress intended arbitration protections to remain intact "even in light of the earlier passage" of that Act and the NLRA. Finally, the Board concluded that the Eighth Circuit simply failed to give any deference to the Board as "primary interpreter of Federal labor law" and, also, that the Board's understanding of federal law "outside the NLRA may in fact be correct[.]"

Turning to a key state court decision, the Board dismissed the California Supreme Court's endorsement of the Fifth Circuit's position in Iskanian v. CLS Transportation Los Angeles LLC, 327 P.3d 29, 137-43, 173 Cal. Rptr. 3d 289, 299-305 (2014), on the ground that "[s]tate courts do not review the Board's decisions and play no role in the administration of the [NLRA]."10

The Two Dissents Make Clear the Board's Decision Will Not Be the Last Word on the Matter

There were two vigorous dissents. Board Member Miscimarra argued "Congress did not vest the [Board] with authority to dictate what internal procedures must govern non-NLRA claims adjudicated by courts and agencies other than the [Board]." Nor can it be correct, he continued, to suggest that the NLRA in those areas "trumps all other Federal statutes." The NLRA cannot be reasonably interpreted as giving employees a broad-based right to "class" treatment under other federal, state and local laws. Indeed, most of those laws and modern treatment of "class" litigation did not even exist until long after the NLRA was enacted. And, he further argued, Congress could not have decided, as part of the NLRA, to protect "class" litigation under all kinds of other laws when those laws themselves do not attach a common meaning to what constitutes "class" litigation.11

Member Johnson argued that the NLRA must yield to the FAA given the long string of Supreme Court decisions noting the "extraordinary strength" of federal policy favoring arbitrations. This case, he stated, "poses the unfortunate example of [a] Federal agency refusing to follow the clear instructions of our nation's Supreme Court on the interpretation of the statute entrusted to our charge" and compounds the error "by rejecting the clear instructions on how to interpret the [FAA], a statute where the Board possesses no special authority or expertise." The opinion, he noted, "effectively ignores the opinions of nearly 40 Federal and State courts" that recognize the flaws in the Board's use of a "strained, tautological reading of the [NLRA]."12

Next Steps for Employers

The Murphy Oil case upholds the Board's 2012 analysis in D.R. Horton that class action waivers in employment arbitration agreements are unenforceable under the NLRA. The decision makes clear that the Board will not acquiesce to any court other than the U.S. Supreme Court, which will keep the issue of enforceability of class action waivers in arbitration agreements alive until the U.S. Supreme Court decides the matter. Employers with such waivers in federal circuits – other than the Second, Fifth and Eighth – will either have to endure unfair labor practice litigation or modify their policies until the Supreme Court resolves the issue.

Footnotes

1 361 NLRB No. 72, case number 10-CA-038804 (October 28, 2014).

2 D.R. Horton, Inc., 357 NLRB No. 184 (2012), enf. denied in relevant part, 737 F.3d 344 (5th Cir. 2013), pet. for reh'g denied (5th Cir. No. 12-60031, April 16, 2014).

3 Id. at 3.

4 Id. at 3-4.

5 Id. at 5.

6 Id. at 5-6.

7 Id. at 7.

8 Id. at 8.

9 Id. at 9.

10 Id. at 2, n.14.

11 Id. at 23 (summarizing dissent).

12 Id. at 35 (summarizing dissent).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions