The NLRA in the 21st century

Imagine discovering that your employer has shirked its overtime wage obligations. You believe they have shorted dozens of employees like you at your office and maybe hundreds throughout your company. You and other employees want to band together to recover lost wages and challenge your employer's policies. Except you have signed an arbitration agreement with a class and collective action waiver. There will be no strength in numbers; each employee must pursue his or her claims alone.

Such mandatory waivers of concerted activity have become ubiquitous in the American workplace following the U.S. Supreme Court's decisions in Stolt-Nielsen S.A. v. AnimalFeeds International Corp, 559 U.S. 662 (2010), and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). Whereas Stolt-Nielsen required that class arbitration have a basis in the parties' arbitration agreement, Concepcion went a step further and struck down as incompatible with the Federal Arbitration Act the state of California's judicial policy prohibiting class action waivers. Critically, though, neither of these two non-employment cases - Stolt-Nielsen involved a maritime dispute and Concepcion was a state law consumer fraud case - considered whether and how the FAA could be reconciled with federal laws like the National Labor Relations Act and the Norris LaGuardia Act that guarantee the right to employee concerted activity.

Now the 7th U.S. Circuit Court of Appeals has done just that in Lewis v. Epic Systems, 15-2997 (May 26, 2016). Class action lawyers have long been taught that the class action device is a procedural mechanism. But in Lewis, the 7th Circuit found that concerted activity is a fundamental substantive right under Section 7 of the NLRA, and any contract that purports to sign away employees' Section 7 rights to collective action is illegal and void.

Why would Congress create a substantive right to joint, collective and class activity for employees? Part of the answer lies in the unique vulnerabilities that people face in the workplace. An individual who brings a consumer or securities case may be signing up for a colossal fight against institutions with seemingly endless resources. But workers who stand up to their employer face potential retaliation - such as harassment, demotion or discharge - that can ravage career prospects and economic security for years to come. A current or former employee who steps forward as a class representative is protecting unnamed employees from blowback, a point that the National Labor Relations Board made in D. R. Horton Inc., 357 N.L.R.B. No. 184 (2012).

A further answer is found in Congress' policy pronouncements when enacting the NLRA. Congress reasoned that employers' ability to organize by forming corporations and other ownership associations creates an unequal bargaining relationship with employees. In turn, this unequal bargaining power fosters "business depressions" by lowering wages and the purchasing power of wage earners. This intuitively makes sense - with less purchasing power in the hands of workers, the economy slows. Congress further found that commerce is hampered by the strife and unrest caused by industrial disputes lacking a productive outlet. Section 7 of the NLRA equalizes this power imbalance by providing employees with the right to collectively confront employers over wages, hours and working conditions.

What does this have to do with class actions? Plenty. The concerted activity protections of the NLRA have always been interpreted to extend beyond union bargaining, to litigation-related activity like the filing of wage and hour lawsuits. For example, in Salt River Valley Water Users Ass'n, 99 NLRB 849, 853-54 (1952), enfd. 206 F.2d 325 (9th Cir. 1953), the 9th U.S. Circuit Court of Appeals found that an employee who solicited signatures for a lawsuit from fellow zanjeros - workers who measured and routed water through canals - was engaging in concerted activity. The employee-representative sought to recover through negotiations or a lawsuit the zanjeros' backpay and overtime wages under the Fair Labor Standards Act. The 9th Circuit found that the zanjeros sought solidarity through negotiations or a potential lawsuit to exert pressure to obtain wages that they believed they were already owed. The court held this was precisely the type of mutual aid or protection that the NLRA was designed to protect.

The 7th Circuit's decision in Epic Systems is grounded in these bedrock interpretations of federal labor law. Epic Systems argued that because the Rule 23 class action procedure did not exist when the NLRA was passed in 1935, the phrase "other concerted activity" could not possibly reference the class and collective actions we know today. But in its careful historical analysis, the 7th Circuit noted that permissive joinder of parties has long been part of the civil procedure landscape. As early as 1853, representative suits were recognized and deemed appropriate where the parties were numerous and their interests were common. Because Congress was aware of these collective and representative procedures when the NLRA was enacted, there is no good reason to exclude present day class and collective mechanisms from the scope of the act.

To be sure, the NLRA does not guarantee that employees can maintain class status through trial. As the NLRB noted in D.R. Horton, employees must still meet Rule 23's requirements to proceed as a class, and they may be unsuccessful in doing so. The NLRA imposes no obligation on judges to certify class actions. It does, however, bar employers from requiring employees to sign away their right to band together to seek class status in the first instance.

Lewis v. Epic Systems has arrived at a critical moment in this country's political and jurisprudential history. The disproportionate power that corporate interests wield in our national life is a central theme of the current presidential contest. At the same time, there has been a surge of publicity about workers who find their statutory rights chipped away by arbitration agreements that make it difficult if not impossible for ordinary citizens to challenge the unlawful practices of corporations with vast resources. The 7th Circuit reminds us that Congress considered this power imbalance over 80 years ago when it secured collective action rights for employees. Workers can only hope that other Circuits and eventually the U.S. Supreme Court will follow suit and ensure that the NLRA's guarantee of concerted activity is fully enforced in the 21st century workplace.

Peter Rukin is a partner and Valerie Brender is an associate at Rukin Hyland Doria & Tindall in San Francisco.