The U.S. House of Representatives has fired another salvo against class and collective action waivers in employment agreements. The recently passed Build Back Better Act (BBB Act) would amend the National Labor Relations Act (NLRA) to make it unlawful for employers to enter into or attempt to enforce any agreement whereby, prior to a dispute, “an employee undertakes or promises not to pursue, bring, join, litigate or support any kind of joint, class, or collective claim” relating to the employment of such employee in any forum. Employers who violate this provision would be subject to civil penalties under the proposed NLRA amendments.
Earlier this year, the Forced Arbitration Injustice Repeal Act (FAIR Act) was introduced in the House. The bill would amend the Federal Arbitration Act (FAA) to provide that pre-dispute arbitration agreements with or without class or collective action waivers (as well as stand-alone waivers not contained in an arbitration agreement) would not be enforceable against employment disputes (as well as consumer, antitrust and civil rights disputes). The FAIR Act was passed by the House Judiciary Committee on November 3. A companion bill was introduced in the Senate and referred to the Senate Judiciary Committee.
Also earlier this year, a third bill, the Protecting the Right to Organize Act of 2021 (PRO Act), was introduced in the House. The PRO Act would amend the NLRA to provide, inter alia, that “[n]otwithstanding chapter 1 of title 9, United States Code (commonly known as the ‘Federal Arbitration Act’), or any other provision of law, it shall be an unfair labor practice under subsection (a)(1) for any employer … to enter into or attempt to enforce any agreement, express or implied, whereby prior to a dispute to which the agreement applies, an employee undertakes or promises not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum ….” This bill passed the House in March 2021.
The BBB Act, the FAIR Act and the PRO Act all appear to be motivated by the Supreme Court’s holding in Epic Systems Corp. v. Lewis that employers can lawfully require employees to resolve employment disputes through individual arbitration rather than by joining other employees in class or collective actions. Epic Systems followed the Court’s landmark ruling in AT&T Mobility LLC v. Concepcion upholding the validity of class action waivers in pre-dispute consumer arbitration agreements.
However, the three House bills appear to differ with regard to their potential effect on employment arbitration agreements:
- Congress has the power to amend the FAA, which is what the FAIR Act purports to do. Under the FAIR Act, pre-dispute arbitration agreements (with or without class and collective action waivers), along with stand-alone class and collective action waivers, would be unenforceable against employment disputes.
- Congress also has the power to enact other federal laws that preclude arbitration of statutory claims arising under those laws. In CompuCredit Corp. v. Greenwood, the Supreme Court announced a bright-line test for ascertaining congressional intent: if a federal statute does not expressly prohibit arbitration, claims brought under that statute are arbitrable under the FAA. The BBB Act does not specifically refer to “arbitration.” Therefore, while the BBB Act might curtail employers’ use of stand-alone class and collective action waivers in employment agreements, under the CompuCredit test it arguably would not prohibit the use of employment arbitration agreements containing class and collective action waivers. Under the FAA, class and collective action waivers within an arbitration agreement are valid and enforceable. However, the PRO Act expressly states that its proposed amendments to the NLRA are “notwithstanding” the FAA or any other provision of law and thus arguably would be more likely to satisfy the CompuCredit standard for determining congressional intent.
At this point, none of these three House bills has been enacted into law. We will continue to monitor the status of these bills for congressional developments, if any, that could affect employment and consumer arbitration agreements.