The Supreme Court Case That Could ‘Overturn the Heart of the New Deal’

AP Photo/Bebeto Matthews, File

Labor union members and supporters rally for better wages in New York

As the Supreme Court gets back to work this Friday, January 5, media coverage of its potentially momentous 2017-2018 term has focused on several high-profile cases that deal with gerrymandering, cell phone privacy, religiously cloaked anti-gay discrimination, and the future of public-employee unions. But one sleeper has received less attention than it deserves. Argued on October 2, this case could strip foundational safeguards in place for over 80 years, essential to ensuring millions of low-wage and non-union workers of their right to fair pay, job security, workplace safety, nondiscrimination, and other guarantees protected by state and federal law. The case gives the Roberts Court, with its newly reconstituted 5-4 conservative majority, a chance to escalate its pro-corporate activism to levels unmatched even by the famously anti-regulatory pre-New Deal Court of a century ago. If the Court reaches the result sought by business advocates, this would, as elaborated by two Seton Hall professors in a 2014 law review article, “effectively end the labor laws.”  

The corporate litigants, joined by the U.S. Chamber of Commerce and the Trump Department of Justice, claim that the once-obscure 1925 Federal Arbitration Act (FAA) empowers employers to require employees, as a condition of employment, to channel all disputes into arbitration proceedings on an individual, one-on-one basis, barring any form of joint or class effort in any forum. This result would override what courts have repeatedly called the “core protection” of the 1932 Norris-LaGuardia Act (Norris-LaGuardia) and the 1935 National Labor Relations Act (NLRA)—that employees, whether represented by a union or not, may by right engage in “concerted activities for the purpose of … mutual aid or protection.”

Regardless of whether the Chamber and its allies get what they are asking for in the pending case, progressives must face up to some hard questions: How could the nation have descended to the point that judicial erasure of explicit provisions structuring employer-employee relations is now possible? How were corporate strategists able to steadily advance—and keep below the radar of the press, progressive political leaders, and the millions of affected workers and families—this multi-decade litigation campaign that teed up such an upheaval? Going forward, what realistically can be done to secure, and if necessary restore, the statutory design for workers’ economic security and equity that hard-line business forces would have the Court shred?

The case—actually three lawsuits, Epic Systems v. Lewis, from Wisconsin; National Labor Relations Board v. Murphy Oil U.S.A., from Alabama; and Ernst & Young LLP v. Morris, from California; consolidated by the Court—involves employees’ claims that employers denied them overtime pay and other required benefits, by misclassifying their jobs and other illegal devices. Such claims are anything but rare. On the contrary, one 2009 study showed that in three major U.S. cities, “76 percent of 4,387 full-time low-wage workers in large and small companies across a variety of industries faced unpaid or underpaid overtime and 26 percent reported being paid less than minimum wage.” Court decisions have documented “extensive and systematic wage theft” from workers in construction, garment manufacturing, nursing homes, agriculture, poultry processing, and restaurants.

Integral to what one academic observer called the “business model” of systematic underpayment of low-wage earners, is making sure those workers cannot seek any form of collective legal recovery. This is true primarily for a simple reason: As Justice Ginsburg put it during oral argument in the pending Supreme Court case, “To proceed alone … will cost much more than any potential recovery for one.” “That’s why,” she went on, “this is truly a situation where there is strength in numbers, and that was the core idea of the NLRA.” 

For employers bent on short-changing low-wage workers, then, banning collective relief—prohibiting joint or class arbitration or court action—means no liability, and a green light to ignore the law. Inevitably, race-to-the-bottom competition ensures that one employer’s wage thievery will quickly metastasize. Whether for a few employees in a neighborhood restaurant or the thousands of workers from 42 states to whom Walmart paid $352 million to settle unpaid wage claims in 2009, the opportunity for joint legal relief is the only policy solution capable of preventing one bad apple employer’s wage theft from going viral and turning systemic. 

A recent Economic Policy Institute study found that approximately 16 percent of private sector non-union employers, employing just under 25 million workers, already impose employment agreements that mandate arbitration and bar class relief. Supreme Court approval of such prohibitions will surely cause those already eye-catching figures to balloon.     

With stakes as high as these, why has there not been more attention paid to the Epic Systems trilogy? Likely, much of the answer is that the Chamber and its allies have largely got away with spinning the case as simply a minor extension of the conservative majority’s three decades of decisions weakening restrictions on contractual mandatory arbitration provisions. Justifiably notorious as this branch of the Court’s pro-corporate agenda is (former Justice Sandra O’Connor branded the Court’s tortured reading of the FAA, “an edifice of [the Court’s] own creation”), it is now widely perceived as a done deal. The conservative bloc is thought already to have gone about as far as it can go to empower businesses to use such provisions to shield themselves from liability.

The progressive justices saw through this spin. Minutes into the oral argument, Justice Stephen Breyer rebuked the business parties’ counsel, Paul Clement, for calling the matter “an arbitration case.” Instead, Breyer said that the Clement’s argument is aimed at “overturning labor law that goes back to … the entire heart of the New Deal.” In the same vein, Justice Elena Kagan curtly observed that the NLRA “establishes a set of rules” about how employers can deal with employees, and that one of those rules is “that employers can’t demand as conditions of employment … waivers of concerted rights.” 

Indeed, to adopt business advocates’ perverse interpretation of the FAA, and insist that this questionable reading must prevail over other fundamental federal statutes, would ignore the unbroken practice of courts, legislatures, and real-world labor relations for more than a century. As noted by a friend-of-the-court brief from ten unions, “multi-claimant arbitration affecting workplace-wide terms and conditions of employment” was common from World War I onward, and a feature of numerous Supreme Court cases applying both the labor statutes and the FAA, as recently as 2009. The Congresses that enacted the FAA, and those that enacted and subsequently revised the New Deal labor laws, were well aware that, in employer-employee disputes, group resolution is a “fundamental attribute of arbitration,” a keystone, as the union brief concluded, of “eight decades of established national labor policy” codified in major federal statutes. 

A revealing marker of how radically business advocates have put their agenda on a collision course with applicable law is the extent to which legal conservatives and progressives have switched sides in the interpretational methodologies they deploy. In the forced arbitration wars, it is the liberal justices and the employee-side advocates, who rely on the interpretive credo long touted by conservatives—a “textualist” focus on the actual provisions of the laws in question. No wonder. The law is on their side. 

In contrast, the Chamber and its allies, including sympathetic judges and justices, repeatedly spurn this traditionally conservative approach, marginalizing or twisting beyond recognition the terms of the applicable laws, and trumping their plain meaning with workarounds or made-up nostrums untethered to relevant statutory text, structural design, or history.

Justice Scalia famously spent his career expounding the hyper-textualist credo that “the text” of a statute, and only the text, constitutes “the law.” Taking into account “vague notions” of Congress’ “purpose,” he scornfully reiterated, is illegitimate, even unconstitutional. But, in order to strike down state laws that banned—as “inequitable”—contractual bars to class arbitration, Justice Scalia in 2011 glibly shoved aside an FAA clause that authorized such state laws; he baldly asserted that permitting “classwide arbitration” would violate a claimed “overarching purpose” of the law.

Employee advocates, by contrast, make a straightforward textualist case, resting on multiple statutory provisions: Both Norris- LaGuardia and the NLRA expressly guarantee employees “the right … to engage in … concerted activities for their mutual aid and protection.” Read literally, that language plainly encompasses joint claims for legal relief, and courts have repeatedly held that. In addition, the NLRA forbids employers to “interfere with, restrain, or coerce” employees in the exercise of that right. Moreover, Norris LaGuardia expressly "repeal[s] … all acts and parts of acts in conflict with [its] provisions.” Norris LaGuardia was enacted seven years after the FAA, so the FAA must be considered one of the “acts and parts of acts” that the Norris LaGuardia Congress repealed any FAA provisions with which it was in conflict. A separate Norris LaGuardia provision renders any private agreement in conflict with its concerted activities guarantee “unenforceable” in any federal court. The 1938 Fair Labor Standards Act (FLSA) contains a similar express authorization for collective relief for illegal underpayment of wages, such as the claims asserted by the worker-plaintiffs in the pending Supreme Court cases. 

The principal employers’ side brief, authored by former Acting Solicitor General Neal Katyal, sought to circumnavigate the plain text of these guarantees by claiming that they did not “unambiguously” bar employers from imposing anti-class relief restrictions through arbitration clauses. In the oral argument, even the conservative justices did not buy that line, and Justice Anthony Kennedy extracted from the companies’ counsel, former Solicitor General Paul Clement, a concession that their respective employees’ joint underpayment claims amounted to “concerted activity” protected by the labor laws. Clement then resorted to a fall-back gambit: that, while the NLRA empowers workers to file a joint arbitration claim, that would only get them to the door of the arbitral organization handling the case; once in the door, they would have to submit to that organization’s rules, even if such rules precluded class proceedings. 

Will the Court uphold the employers’ advocates’ arguments? Although the news accounts leaned toward predicting a business win, at the end of the argument, it was not clear by the end of the oral arguments whether Clement’s rules-of-the-forum approach will prevail, or whether, if it does, business advocates will end up with what they are really after. What they want, of course, is brutally clear—a blank check to impose otherwise illegal prohibitions against concerted legal action, simply by inserting them in the mandatory arbitration sections of take-it-or-leave-it employment contracts. What was not clear was whether Kennedy or Chief Justice John Roberts, or, possibly, other members of the conservative bloc, are prepared to take that leap.

Neither Roberts nor Kennedy, much less their conservative colleagues Samuel Alito, Neil Gorsuch, and Clarence Thomas, definitively showed their hands. Five votes could well exist to permit employers to go on writing no-class-relief restrictions into contractual forced arbitration provisions, or to achieve a similar result by a convenient sham, such as specifying that all arbitrations must be administered by a particular organization that bars class proceedings.

To put in perspective how far rightward, and backward, business advocates have driven the law over recent decades, consider this: to gut the labor law protections at stake in Epic Systems, the Court must overrule, or marginalize, a 1978 Supreme Court decision which held that the NLRA’s guarantee of “concerted activity” for “mutual aid or protection” protects joint efforts “to improve working conditions through resort to administrative and judicial forums.” This 7-to-2 ruling was penned by Justice Lewis Powell. 

That authorship speaks volumes. Just prior to his 1971 appointment to the Court by President Richard Nixon, Powell, then a prominent corporate lawyer, drafted the now-famous “Confidential Memorandum” to the U.S. Chamber of Commerce, in which Powell advised the Chamber to replicate the successful strategies of civil rights groups, labor unions, and liberal public interest law firms, which had, he observed, demonstrated that “an activist-minded Supreme Court … may be the most important instrument for social, economic, and political change.”

Embracing this counsel, the Chamber has quarterbacked a four-decade litigation campaign. Under the Roberts Court, that campaign has reached a point where the conservative bloc has given the Chamber a far higher percentage of victories than Powell himself voted for during his 16 years on the Court (through 2015, a third higher than Powell’s career figure and, in the 2016-17 term, an eye-popping 80 percent). One wonders whether the late Justice Powell might worry that his recommendation had given birth to a Frankenstein monster. 

Plainly, a serious progressive effort to reverse this counter-revolution four decades in the making will be no simple task, nor achieved quickly. But there are sound reasons why such a long-term fight can be won.

To begin with, business advocates could never have advanced their scheme to get the Supreme Court to zero out hard-won legal protections against corporate overreach if their campaign and its results had not stayed largely off the radar screens of the media, the electorate, and, more remarkably, was largely absent from progressive politics. Changing this dynamic, however, is not impossible.

Such a campaign would start with an important asset: the progressive justices appear to grasp the real-world threat to ordinary citizens’ interests posed by the Chamber’s campaign, as well as the legal chicanery its architects, including their conservative colleagues on the Court, have deployed to advance that threat. In the Epic Systems oral argument, Justices Breyer, Kagan, Ginsburg, and Sotomayor adroitly framed the case as a precedent-shattering obliteration of the plain text of landmark labor laws. Regrettably, only scattered media accounts picked up the messages embedded in their questions to the industry lawyers.

Progressive advocates have the capacity to sharpen reporters’ perceptions, and to highlight the importance of this threat. 

Indeed, over the past few years, consumer advocacy groups have dramatically increased media understanding and coverage of the way companies like Wells Fargo and Equifax have exploited the Court’s forced arbitration rulings. These advocates mounted a formidable defense of the Consumer Financial Protection Bureau’s rule banning arbitration clauses in consumer financial agreements. They persuaded Senate Democrats to vote unanimously to save the CFPB rule—no mean feat, considering the ferocity of the financial industry’s drive to kill it—forcing Vice President Pence to break a 50-50 tie.

Building on such efforts, progressive leaders can connect the dots between courtroom battles that, like the pending wage theft cases, put foundational legal remedies against corporate law-breaking on the chopping block, and broader political struggle against policies that worsen inequality. Progressive leaders just need to include the courts in the picture they are painting of conservatives’ political agenda—right alongside tax cuts for the rich and diminished income health care guarantees.

Conservatives’ politicization of the judicial branch, especially the Supreme Court, is no secret. What is a secret, though one hiding in plain sight, is that this agenda involves tilting not only the scales of justice but the rewards of the economy toward large corporations and away from consumers, workers, retirees, and others dependent on those corporations.  It is up to progressive leaders to bring that secret out in the open, and lay the groundwork for rolling back the radical judicial nullification of essential legal protections that corporate advocates have engineered, and remain hell-bent to extend.

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