Morris v. Ernst & Young, LLP

• Decision Date: 22 August 2016
• Docket Number: No. 13-16599,13-16599
• Citation: 834 F.3d 975
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: Stephen Morris; Kelly McDaniel, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. Ernst & Young, LLP; Ernst & Young U.S., LLP, Defendants-Appellees.

834 F.3d 975

Stephen Morris; Kelly McDaniel, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,

v.Ernst & Young, LLP; Ernst & Young U.S., LLP, Defendants-Appellees.

No. 13-16599

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 17, 2015 San Francisco, California

Filed August 22, 2016

Max 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.

Rex S. 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 Defendants-Appellees.

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.

OPINION

THOMAS, Chief Judge:

In this 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 arbitration.

I

Stephen 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.

Nonetheless, 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.

The 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.

Morris 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 ”).

We have 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).

II

This 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, 98 S.Ct. 2505, 57 L.Ed.2d 428 (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.

A

The 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, 104 S.Ct. 1505, 79 L.Ed.2d 839 (1984) (quoting Eastex , 437 U.S. at 568, 98 S.Ct. 2505 ). “[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.

The 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.

The 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. Id.¹

The 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, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Lechmere, Inc. v. NLRB , 502 U.S. 527, 536, 112 S.Ct. 841, 117 L.Ed.2d 79 (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, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002).²

Under Chevron, we first look to see “whether Congress has directly spoken to the precise question at issue.” Chevron , 467 U.S. at 842, 104 S.Ct. 2778. In analyzing Congressional intent, we employ the “traditional tools of statutory construction.” Id. at 843 & n. 9, 104 S.Ct. 2778. 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, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (quoting Gustafson v. Alloyd Co. , 513 U.S. 561, 569, 115 S.Ct. 1061, 131 L.Ed.2d 1 (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, 104 S.Ct. 2778.

In this case, we need go no further. The intent of Congress is clear from the statute and is consistent with the Board's interpretation.

To 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.

Section 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).

Section 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, 98 S.Ct. 2505 ; see also City Disposal Sys. , 465 U.S. at 835, 104 S.Ct. 1505 (“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...