Stephen Morris; Kelly McDaniel, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,
Ernst & Young, LLP; Ernst & Young U.S., LLP, Defendants-Appellees.
and Submitted November 17, 2015 San Francisco, California
from the United States District Court for the Northern
District of California Ronald M. Whyte, Senior District
Judge, Presiding D.C. No. 5:12-cv-04964-RMW
Folkenflik (argued), Folkenflik & McGerity, New York, New
York; H. Tim Hoffman, H. Tim Hoffman Law, Oakland,
California; Ross L. Libenson, Libenson Law, Oakland,
California; for Plaintiffs-Appellants.
Heinke (argued) and Gregory W. Knopp, Akin Gump Strauss Hauer
& Feld, Los Angeles, California; Daniel L. Nash, Akin
Gump Strauss Hauer & Feld, Washington, D.C.; for
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; Paul L. Thomas, Attorney; National
Labor Relations Board, Washington, D.C.; for Amicus Curiae
National Labor Relations Board.
Before: Sidney R. Thomas, Chief Judge and Sandra S. Ikuta and
Andrew D. Hurwitz, Circuit Judges.
by Judge Ikuta
panel vacated the district court's order compelling
individual arbitration in an employees' class action
alleging that Ernst & Young misclassified employees to
deny overtime wages in violation of the Fair Labor Standards
Act and California labor laws.
condition of employment, the employees were required to sign
agreements that contained a "concerted action
waiver" requiring the employees to pursue legal claims
against Ernst & Young exclusively through arbitration,
and arbitrate only as individuals and in "separate
panel held that an employer violates § 7 and § 8 of
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 of conditions of employment. The panel held that Ernst
& Young interfered with the employees' right to
engage in concerted activity under the National Labor
Relations Act by requiring the employees to resolve all of
their legal claims in "separate proceedings." The
panel concluded that the "separate proceedings"
terms in the Ernst & Young contracts could not be
panel held that the Federal Arbitration Act did not dictate a
contrary result. The panel held that when an arbitration
contract professes to waive a substantive federal right, the
savings clause of the Federal Arbitration Act prevents the
enforcement of that waiver.
panel vacated the order, and remanded to the district court
to determine whether the "separate proceedings"
clause was severable from the contract. The panel held that
it need not reach plaintiff's alternative arguments
regarding the Norris LaGuardia Act, the Fair Labor Standards
Act, or whether Ernst & Young waived its right to
Ikuta dissented because she believed that the majority's
opinion violated the Federal Arbitration Act's command to
enforce arbitration agreements according to their terms, was
directly contrary to Supreme Court precedent, and was on the
wrong side of a circuit split. Judge Ikuta concluded that
§ 7 of the National Labor Relations Act did not prevent
the collective action waiver at issue here, and would hold
that the employee's contract must be enforced according
to its terms.
THOMAS, Chief Judge:
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
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
forum-in court, in arbitration proceedings, or elsewhere.
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.
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.
and McDaniel argue that their agreements with the company
violate federal 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 (2012) ("Horton
I"), enf. denied 737 F.3d 344 (5th Cir.
2013) ("Horton II"); see also Murphy
Oil USA, Inc., 361 NLRB No. 72 (2014) ("Murphy
Oil I"), enf. denied 808 F.3d 1013 (5th
Cir. 2015) ("Murphy Oil II").
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 (9th Cir. 2009).
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 (1978). Concerted activity-the right of employees to
act together-is 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.
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 (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.
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, slip op. at 1.
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 forum-here,
arbitration-and they may never do so in concert.
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 (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 (2002).
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.
case, we need go no further. The intent of Congress is clear
from the statute and is consistent with the Board's
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.
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 (9th Cir. 1980)
(describing relationship between sections; § 7
establishes rights and § 8 enforces them).
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 (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 (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 (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 (1st Cir. 1973) (same).
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 (1975) (quoting 29 U.S.C. §
157). The intent of Congress in § 7 is clear and
comports with the Board's interpretation of 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 (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 (9th Cir. 1995) (section 8
prohibits conditioning employment on waiver of § 7
right). 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.
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.
J.H. Stone & Sons, 125 F.2d 752 (7th Cir. 1942),
concluded that individual dispute resolution requirements
nullify the right to ...