Academic journal article Harvard Law Review

Deference and the Federal Arbitration Act: The NLRB's Determination of Substantive Statutory Rights

Academic journal article Harvard Law Review

Deference and the Federal Arbitration Act: The NLRB's Determination of Substantive Statutory Rights

Article excerpt


Modern Supreme Court jurisprudence has dramatically expanded the scope of the Federal Arbitration Act I (1) (FAA), which generally provides that agreements to arbitrate disputes are enforceable by courts. (2) The Court's decisions have also supported the use of arbitration agreements to require that disputes be arbitrated on an individual basis, precluding class actions or other collective litigation. (3)

However, on January 3, 2012, the National Labor Relations Board (NLRB or Board) decided D.R. Horton, Inc., (4) holding that it is unlawful under the National Labor Relations Act (5) (NLRA) for employers to require that employees agree to arbitrate all employment-related claims on an individual basis and thereby prohibit employees from accessing class or collective procedures in both judicial and arbitral forums. (6) According to the Board, those arbitration agreements violate the central right the NLRA provides to employees: the right to engage in "concerted activities for ... mutual aid or protection." (7)

In its decision, the NLRB carefully considered the interaction between the NLRA and the FAA and found that holding the arbitration agreements unlawful presented no conflict between the two statutes. (8) The Supreme Court has held that contracting parties may agree to arbitrate claims arising under a federal statute, but has repeatedly stated that in doing so "a party does not forgo the substantive rights afforded by the statute." (9) The Board held that the "right" of employees to act concertedly by collectively bringing a legal claim was "the core substantive right" established by the NLRA. (10) Because the arbitration agreement impermissibly waived a right that is substantive and not merely procedural, the FAA would not support enforcing the agreement and therefore there was no conflict between the NLRA and the FAA.

Many scholars have strongly and persuasively supported D.R. Horton. (11) Yet on review, a divided panel of the Fifth Circuit rejected the decision. (12) In addition, the Eighth and Second Circuits, (13) and nearly all district courts to have considered the issue, (14) have declined to follow D.R. Horton's reasoning. (15)

Rather than considering only the merits, this Note focuses on judicial deference and argues that the courts have erred by not showing deference to a key portion of the NLRB's decision. Under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., (16) courts give deferential review to an agency's interpretation of the statute it administers. (17) Courts discussing D.R. Horton generally have given deference to the Board's analysis of the scope of employees' section 7 rights, but have given no deference to the entire portion of the Board's decision evaluating the interaction between the NLRA and the FAA on the ground that the NLRB is not charged with administering the FAA. (18)

Their treatment sweeps too broadly, without adequate attention to the task the NLRB actually performs in each part of its analysis. This Note argues that deference is also warranted for the Board's finding that the NLRA provides employees with a substantive statutory right to pursue legal claims collectively, which would render the arbitration agreements waiving that right unenforceable under the FAA. Although most of the Board's discussion of the FAA is not entitled to deference, the Board's finding that concerted legal activity is a substantive right under the NLRA is different. That determination is based on the NLRB's interpretation of the nature of the rights guaranteed by the NLRA, the statute it administers, and therefore Chevron deference applies. (19)

This Note proceeds as follows. Part I provides relevant background information, giving an overview of the rights created by the NLRA, the provisions of the FAA and related Supreme Court decisions, and the NLRB's D.R. Horton decision. Part II discusses Chevron deference and observes how scholars and courts have applied deference principles to D. …

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