                    FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


STEPHEN MORRIS; KELLY                   No. 13-16599
MCDANIEL, on behalf of
themselves and all others                  D.C. No.
similarly situated,                  5:12-cv-04964-RMW
           Plaintiffs-Appellants,

               v.                           OPINION

ERNST & YOUNG, LLP; ERNST
& YOUNG U.S., LLP,
       Defendants-Appellees.


     Appeal from the United States District Court
         for the Northern District of California
   Ronald M. Whyte, Senior District Judge, Presiding

       Argued and Submitted November 17, 2015
               San Francisco, California

                    Filed August 22, 2016

 Before: Sidney R. Thomas, Chief Judge and Sandra S.
    Ikuta and Andrew D. Hurwitz, Circuit Judges.

                Opinion by Judge Thomas;
                 Dissent by Judge Ikuta
2                  MORRIS V. ERNST & YOUNG

                           SUMMARY*


                            Labor Law

    The 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.

    As a 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 proceedings.”

    The 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 enforced.

    The panel held that the Federal Arbitration Act did not
dictate a contrary result. The panel held that when an

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                MORRIS V. ERNST & YOUNG                    3

arbitration contract professes to waive a substantive federal
right, the savings clause of the Federal Arbitration Act
prevents the enforcement of that waiver.

   The 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 arbitration.

    Judge 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.


                        COUNSEL

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.
4               MORRIS V. ERNST & YOUNG

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.


                         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.
                MORRIS V. ERNST & YOUNG                      5

    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).
6               MORRIS V. ERNST & YOUNG

                              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
(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 (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.

  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
                   MORRIS V. ERNST & YOUNG                              7

         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
(1984). Lechmere, Inc. v. NLRB, 502 U.S. 527, 536 (1992)
(Chevron framework applies to NLRB constructions of the


 1
   The contract in Horton I required all claims to be heard in arbitration
and required the arbitrator to “hear only Employee’s individual claims.”
Horton I, 357 NLRB No. 184, slip op. at 1. It also contained an express
waiver of class or collective proceedings in arbitration. Id. Ernst &
Young concedes that the “separate proceedings” term in the exclusive
arbitration agreements here has the same effect.
8                  MORRIS V. ERNST & YOUNG

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).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. 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.

   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.



    2
    The Board has both rulemaking and adjudicative powers, 29 U.S.C.
§ 156, § 160, and it may authoritatively interpret the NLRA through either
process. NLRB v. Bell Aerospace Co. Div. of Textron, 416 U.S. 267, 294
(1974) (concluding that the Board may announce “new principles in an
adjudicative proceeding”). Our analysis under Chevron does not extend
to the Board’s interpretation of statutes it does not administer, to the
Board’s interpretation of Supreme Court cases, or to the Board’s remedial
preferences.
                 MORRIS V. ERNST & YOUNG                       9

    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; 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
10                  MORRIS V. ERNST & YOUNG

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).

    It is 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 statute.3


 3
    Eastex clarifies that concerted activity extends to judicial forums, and
it does not limit concerted activity to any particular vehicle or mechanism.
437 U.S. at 556 & n.15. Further, we reject the argument that the NLRA
cannot protect a right to concerted legal action because Rule 23 class
                   MORRIS V. ERNST & YOUNG                           11

     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).4 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.




actions did not exist until after the NLRA was passed. See City Disposal
Sys., 465 U.S. at 835 (noting that the NLRA has forward-looking view of
§ 7 protections). Rule 23 is not the source of employee rights; the NLRA
is. Eastex settles this question by expressly including concerted legal
activity within the set of protected § 7 activities. 437 U.S. at 566.
   4
      In contrast, there was no § 8 violation in Johnmohammadi v.
Bloomingdale’s, Inc. because the employee there could have opted out of
the individual dispute resolution agreement and chose not to. 755 F.3d
1072, 1076 (9th Cir. 2014).
12              MORRIS V. ERNST & YOUNG

    Section 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.

    Similarly, J.H. Stone & Sons, 125 F.2d 752 (7th Cir.
1942), concluded that individual dispute resolution
requirements nullify the right to concerted activity established
by § 7:

        By the clause in dispute, the employee bound
        himself to negotiate any differences with the
        employer and to submit such differences to
        arbitration. The result of this arbitration was
        final. Thus the employee was obligated to
        bargain individually and, in case of failure,
        was bound by the result of arbitration. This is
        the very antithesis of collective bargaining.

Id. at 756.

    The “separate proceedings” clause in this case is no
different. Under the clause, the employee is obligated to
pursue work-related claims individually and, no matter the
outcome, is bound by the result. This restriction is the “very
antithesis” of § 7’s substantive right to pursue concerted
work-related legal claims. For the same reason, the Seventh
Circuit recently concluded that “[a] contract that limits
                    MORRIS V. ERNST & YOUNG                             13

Section 7 rights that is agreed to as a condition of continued
employment qualifies as ‘interfer[ing] with’ or ‘restrain[ing]
. . . employees in the exercise’ of those rights in violation of
Section 8(a)(1).” Lewis v. Epic Sys. Corp., 823 F.3d 1147,
1155 (7th Cir. 2016). Indeed, § 7 rights would amount to
very little if employers could simply require their waiver.

    In sum, the Board’s interpretation of § 7 and § 8 is
correct. Section 7’s “mutual aid or protection clause”
includes the substantive right to collectively “seek to improve
working conditions through resort to administrative and
judicial forums.” Eastex, 437 U.S. at 566; accord City
Disposal Sys., 465 U.S. at 834–35. Under § 8, an employer
may not defeat the right by requiring employees to pursue all
work-related legal claims individually. See J.I. Case Co. v.
NLRB, 321 U.S. 332, 337 (1944) (“Individual contracts . . .
may not be availed of to defeat or delay the procedures
prescribed by the National Labor Relations Act”). The
NLRA is unambiguous, and there is no need to proceed to the
second step of Chevron.5

    Applied to the Ernst & Young contract, § 7 and § 8 make
the terms of the concerted action waiver unenforceable. The
“separate proceedings” clause prevents concerted activity by
employees in arbitration proceedings, and the requirement
that employees only use arbitration prevents the initiation of
concerted legal action anywhere else. The result: interference

  5
   Because congressional intent can be ascertained employing the usual
tools of statutory construction, we do not proceed to step two of the
Chevron analysis. However, if that analysis were undertaken, the only
conclusion could be that “[t]he Board’s holding is a permissible
construction of ‘concerted activities for . . . mutual aid or protection’ by
the agency charged by Congress with enforcement of the Act.”
Weingarten, 420 U.S. at 260 (quoting 29 U.S.C. § 157).
14                 MORRIS V. ERNST & YOUNG

with a protected § 7 right in violation of § 8. Thus, the
“separate proceedings” terms in the Ernst & Young contracts
cannot be enforced.6

                                    B

    The Federal Arbitration Act (“FAA”) does not dictate a
contrary result. The “separate proceedings” provision in this
case appears in an agreement that directs employment-related
disputes to arbitration. But the arbitration requirement is not
the problem. The same provision in a contract that required
court adjudication as the exclusive remedy would equally
violate the NLRA. The NLRA obstacle is a ban on initiating,
in any forum, concerted legal claims—not a ban on
arbitration.

    The FAA “was enacted in 1925 in response to widespread
judicial hostility to arbitration agreements.” AT&T Mobility
LLC v. Concepcion, 563 U.S. 333, 339 (2011). In relevant
part, it provides that,

         A written provision in any maritime
         transaction or a contract evidencing a


 6
    Ernst & Young also argues for the first time on appeal that there is no
evidence that Morris and McDaniel are statutory employees covered by
the NLRA. This argument was not adequately raised before the district
court and is therefore waived. See Solis v. Matheson, 563 F.3d 425, 437
(9th Cir. 2009). Likewise, we also reject the claim that the Board’s
interpretations of the NLRA in Horton I and Murphy Oil I do not apply
here because there was no NLRB proceeding or finding of an unfair labor
practice. We agree with the agency’s interpretation of the NLRA because
it gives effect to Congress’s intent. Our agreement has nothing to do with
the procedural history of the cases from which the Board’s interpretation
arose.
               MORRIS V. ERNST & YOUNG                    15

       transaction involving commerce to settle by
       arbitration a controversy thereafter arising out
       of such contract or transaction . . . shall be
       valid, irrevocable, and enforceable, save upon
       such grounds as exist at law or in equity for
       the revocation of any contract.

9 U.S.C. § 2. The Act requires courts to “place arbitration
contracts ‘on equal footing with all other contracts,’”
DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468 (2015)
(quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
440, 443 (2006)), and to “enforce them according to their
terms,” Concepcion, 563 U.S. at 339. Not all contract terms
receive blanket enforcement under the FAA, however. The
FAA’s

       saving clause permits agreements to arbitrate
       to be invalidated by “generally applicable
       contract defenses, such as fraud, duress, or
       unconscionability,” but not by defenses that
       apply only to arbitration or that derive their
       meaning from the fact that an agreement to
       arbitrate is at issue.

Id. (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S.
681, 687 (1996)). Accordingly, when a party raises a defense
to the enforcement of an arbitration provision, a court must
determine whether the defense targets arbitration contracts
without “due regard . . . to the federal policy favoring
arbitration.” DIRECTV, 136 S. Ct. at 471 (quoting Volt Info.
Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ.,
489 U.S. 468, 476 (1989)).
16                 MORRIS V. ERNST & YOUNG

    The contract defense in this case does not “derive [its]
meaning from the fact that an agreement to arbitrate is at
issue.” Concepcion, 563 U.S. at 339. An agreement to
arbitrate work-related disputes does not conflict with the
NLRA. Indeed, federal labor policy favors and promotes
arbitration. United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 578 (1960).

    The illegality of the “separate proceedings” term here has
nothing to do with arbitration as a forum. It would equally
violate the NLRA for Ernst & Young to require its employees
to sign a contract requiring the resolution of all work-related
disputes in court and in “separate proceedings.” The same
infirmity would exist if the contract required disputes to be
resolved through casting lots, coin toss, duel, trial by ordeal,
or any other dispute resolution mechanism, if the contract
(1) limited resolution to that mechanism and (2) required
separate individual proceedings. The problem with the
contract at issue is not that it requires arbitration; it is that the
contract term defeats a substantive federal right to pursue
concerted work-related legal claims.7

    When an illegal provision not targeting arbitration is
found in an arbitration agreement, the FAA treats the contract
like any other; the FAA recognizes a general contract defense




  7
     In contrast, the arbitration cases cited by the dissent and Ernst &
Young involved litigants seeking to avoid an arbitral forum—their
defenses targeted arbitration. Here, Morris and McDaniel seek to exercise
substantive rights guaranteed by federal statute in some forum, including
in arbitration.
                    MORRIS V. ERNST & YOUNG                              17

of illegality.8 9 U.S.C. § 2; Concepcion, 563 U.S. at 339.
The term may be excised, or the district court may decline
enforcement of the contract altogether. See 19 Richard Lord,
8 Williston on Contracts § 19:70 (4th ed. 1990) (“Illegal
portions of a contractual agreement may be severed if the
illegal provision is not central to the parties’ agreement.”);
see also Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d
425, 433 (9th Cir. 2015) (“‘generally applicable’ contract
defense” is “preserved by § 2’s saving clause”).

    Crucial to today’s result is the distinction between
“substantive” rights and “procedural” rights in federal law.
The Supreme Court has often described rights that are the
essential, operative protections of a statute as “substantive”
rights. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
29 (1991) (quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). In
contrast, procedural rights are the ancillary, remedial tools
that help secure the substantive right. See id.; CompuCredit
Corp. v. Greenwood, 132 S. Ct. 665, 671 (2012) (describing
difference between statute’s “guarantee” and provisions
contemplating ways to enforce the core guarantee).9


  8
    Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662
(2010), is not to the contrary. Under Stolt, an arbitrator may not add to the
terms of an arbitration agreement, and therefore may not order class
arbitration unless the contract provides for it Id. at 684. This does not
require a court to enforce an illegal term. Nor would Stolt prevent the
district court, on remand, from severing the “separate proceedings” clause
to bring the arbitration provision into compliance with the NLRA.
 9
   The Age Discrimination in Employment Act (“ADEA”), for example,
establishes a primary, substantive right against age discrimination.
29 U.S.C. § 623; Gilmer, 500 U.S. at 27. It provides for collective
proceedings as one way, among many, to secure that right. 29 U.S.C.
18                  MORRIS V. ERNST & YOUNG

     The difference is key, because substantive rights cannot
be waived in arbitration agreements. This tenet is a
fundamental component of the Supreme Court’s arbitration
jurisprudence: “[b]y agreeing to arbitrate a statutory claim, a
party does not forgo the substantive rights afforded by the
statute; it only submits to their resolution in an arbitral, rather
than a judicial, forum.” Mitsubishi, 473 U.S. at 628. Thus,
if a contract term in an arbitration agreement “operate[s] . . .
as a prospective waiver of a party’s right to pursue statutory
remedies for [substantive rights], we would have little
hesitation in condemning the agreement.” Id. at 637 n.19; see
also Am. Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304,
2310 (2013); Green Tree Fin. Corp.-Al. v. Randolph,
531 U.S. 79, 90 (2000); Gilmer, 500 U.S. at 28;
Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220,
240 (1987).

    The FAA does not mandate the enforcement of contract
terms that waive substantive federal rights. Thus, when an
arbitration contract professes the waiver of a substantive
federal right, the FAA’s saving clause prevents a conflict
between the statutes by causing the FAA’s enforcement
mandate to yield. See Epic Sys., 823 F.3d at 1159 (“Because
the NLRA renders [the defendant’s] arbitration provision
illegal, the FAA does not mandate its enforcement.”).10


§ 626 (providing for “Recordkeeping, investigation, and enforcement” of
the ADEA, including collective legal redress).
  10
     Contrary to the suggestions of the dissent, the Supreme Court has
repeatedly endorsed the distinctive roles of substantive and procedural
rights in its recent arbitration case law. As recently as Italian Colors, the
Supreme Court has held that the key question for courts assessing a
statutory rights claim arising from an arbitration agreement is whether the
agreement “constitute[s] the elimination of the right to pursue that
                   MORRIS V. ERNST & YOUNG                             19

    The rights established in § 7 of the NLRA—including the
right of employees to pursue legal claims together—are
substantive. They are the central, fundamental protections of
the Act, so the FAA does not mandate the enforcement of a
contract that alleges their waiver. The text of the Act
confirms the central role of § 7: that section establishes the
“Right of employees as to organization.” 29 U.S.C. § 157
(emphasis added). No other provision of the Act creates
these sorts of rights. Without § 7, the Act’s entire structure
and policy flounder. For example, § 8 specifically refers to
the “exercise of the rights guaranteed in section 157.”
28 U.S.C. § 158; Bighorn Beverage, 614 F.2d at 1241
(“Section 8(a)(1) of the Act implements [§ 7’s] guarantee”).

    The Act’s other enforcement sections are similarly
confused without the rights established in § 7. See, e.g.,
29 U.S.C.§ 160 (providing powers of the Board to prevent
interference with rights in § 7). There is no doubt that
Congress intended for § 7 and its right to “concerted
activities” to be the “primary substantive provision” of the
NLRA. See Gilmer, 500 U.S. at 24. For this reason, the right




remedy.” 133 S. Ct. at 2311 (emphasis in original). Similarly, in
CompuCredit, the Court distinguished the core, substantive “guarantee”
of the Credit Repair Organizations Act (“CROA”) from a provision that
contemplated the possibility of a judicial forum for vindicating the core
right. 132 S. Ct. at 671 (holding that contract “parties remain free to
specify” their choice of judicial forum “so long as the guarantee” of the
Act “is preserved.” (emphasis in original)). Contract parties can agree on
the procedural terms they like (such as resolving disputes in arbitration),
but they may not agree to leave the substantive protections of federal law
at the door.
20                 MORRIS V. ERNST & YOUNG

to concerted employee activity cannot be waived in an
arbitration agreement.11

     The dissent ignores this fundamental component of the
Supreme Court’s arbitration jurisprudence and argues that we
must first locate a “contrary congressional command” before
preventing the enforcement of an invalid contract term. But
as the Seventh Circuit put it, “this argument puts the cart
before the horse.” Epic Sys., 823 F.3d at 1156. Rather,
“[b]efore we rush to decide whether one statute eclipses
another, we must stop to see if the two statutes conflict at
all.” Id. The saving clause in the FAA prevents the need for
such a conflict.

    The dissent and Ernst & Young insist that we must
effectively ignore the saving clause and first search to see
which of two statutes will “trump” the other. But this is not
the way the Supreme Court has instructed us to approach
statutory construction. Vimar Seguros y Reaseguros, S.A. v.
M/V Sky Reefer, 515 U.S. 528, 533 (1995) (“[W]hen two
statutes are capable of co-existence . . . it is the duty of the
courts, absent a clearly expressed congressional intention to
the contrary, to regard each as effective.” (citation omitted)).
Nor is a hunt for statutory conflict the “single question” the
Supreme Court has told us to ask when examining the FAA’s
interaction with other federal statutes. Dissent at 35–36.
Indeed, if we first had to locate a conflict between the FAA
and other statutes, the FAA’s saving clause would serve no
purpose, which cannot be the case. TRW Inc. v. Andrews, 534


  11
     An individual can opt-out of a class action, or opt-in to a collective
action, in federal court (both procedural mechanisms). This does not
enable an employer to require the same individual to waive the substantive
labor right to initiate concerted activities set forth in the NLRA.
                   MORRIS V. ERNST & YOUNG                             21

U.S. 19, 31 (2001) (“a statute ought, upon the whole, to be so
construed that, if it can be prevented, no clause, sentence, or
word shall be superfluous, void, or insignificant” (citation
omitted)); see Epic Sys., 823 F.3d at 1157 (holding that there
is no inherent conflict between the FAA and the NLRA).12
Instead, we join the Seventh Circuit in treating the interaction
between the NLRA and the FAA in a very ordinary way:
when an arbitration contract professes to waive a substantive
federal right, the saving clause of the FAA prevents the
enforcement of that waiver.13

    Thus, the dissent’s citations to cases involving the waiver
of procedural rights are misplaced. CompuCredit, for
example, was a choice-of-judicial-forum case that addressed
the waiver of procedural rights. In the Supreme Court’s
words, the case concerned “whether claims under the
[CROA] can proceed in an arbitrable forum.” 132 S. Ct. at
673. In today’s case, the issue is not whether any particular
forum, including arbitration, is available but rather which
substantive rights must be available within the chosen forum.
And the Supreme Court has repeatedly held that the core,
substantive “rights” created by federal law survive contract
terms that purport their waiver. Such was the case in
CompuCredit, where the Court concluded that the use of a
judicial forum contemplated by the CROA could be waived


 12
    Neither the text of the FAA nor the Supreme Court’s arbitration cases
support the dissent’s theory that the FAA’s saving clause functions
differently when a federal, as opposed to state, statute renders a contract
term susceptible to an illegality defense.
 13
   Because we see no inherent conflict between the FAA and the NLRA,
we make no holding on which statute would win in a fight, nor do we
opine on the meaning of their respective dates of passage, re-passage, and
amendment.
22                 MORRIS V. ERNST & YOUNG

so long as “the guarantee of the legal power to impose
liability—is preserved.” 132 S. Ct. at 671 (emphasis in
original). In other words, parties can choose their forums but
they cannot contract away the basic guarantees of a federal
statute.

    Gilmer was also a judicial-choice-of-forum case that
addressed the waiver of procedural rights. There the Supreme
Court again distinguished between a waivable procedural
right (to use a court for class claims rather than arbitration)
and a nonwaivable substantive right (to be free from age
discrimination). 500 U.S. at 27–29. Not surprisingly, the
Court held that the procedural right to use class proceedings
in federal court could be waived. Id. at 32.14

    Italian Colors, as well, was a judicial forum case that
endorsed the distinction between a statute’s basic guarantee
and the various ways litigants may go about vindicating it.
The Court was careful to distinguish between the matters
“involved in proving a statutory remedy” and whether an
agreement “constitute[s] the elimination of the right to pursue
that remedy.” Italian Colors, 133 S. Ct. at 2311. The
plaintiffs objected that it would be infeasible to pursue their
antitrust claims against the defendant without the ability to
form a class. The Court rejected this argument, noting that so
long as the substantive federal right remains—there, the right
to pursue antitrust claims in some forum—then the arbitration
agreements would be enforced according to their terms. Id.
at 2310–12.




  14
     In fact, the arbitration procedures in Gilmer allowed for collective
proceedings. Id. The plaintiff simply preferred court adjudication.
                MORRIS V. ERNST & YOUNG                      23

    The dissent misreads these cases to require a conflict
between the FAA and the substantive provisions of other
federal statutes. But as the Supreme Court has repeatedly
made clear, there is a limiting principle built into the FAA on
what may be waived in arbitration: where substantive rights
are at issue, the FAA’s saving clause works in conjunction
with the other statute to prevent conflict.

     The interaction between the NLRA and the FAA makes
this case distinct from other FAA enforcement challenges in
at least three additional and important ways.

     First, because a substantive federal right is waived by the
contract here, it is accurate to characterize its terms as
“illegal.” The dissent objects that a term in an arbitration
contract can only be “illegal” if Congress issues a contrary
command specifically referencing arbitration. But then it
proceeds to cite cases where no substantive federal rights
were waived. In those cases, the conflict between contract
terms and federal law was less direct. In Italian Colors, for
example, the Court concluded that the antitrust laws establish
no statutory right to pursue concerted claims: the acts “make
no mention of class actions.” Id. at 2309. In contrast, the
federal statutory regime in this case does exactly the opposite.
Where the antitrust laws are silent on the issue of concerted
legal redress, the NLRA is unambiguous: concerted activity
is the touchstone, and a ban on the pursuit of concerted work-
related legal claims interferes with a core, substantive right.

    Second, the enforcement defense in this case has nothing
to do with the adequacy of arbitration proceedings. In
Concepcion and Italian Colors, the Court held that arguments
about the adequacy of arbitration necessarily yield to the
policy of the FAA. Concepcion, 563 U.S. at 351; Italian
24                 MORRIS V. ERNST & YOUNG

Colors, 133 S. Ct. at 2312. The Court “specifically rejected
the argument that class arbitration [is] necessary to prosecute
claims ‘that might otherwise slip through the legal system.’”
Italian Colors, 133 S. Ct. at 2312 (quoting Concepcion,
563 U.S. at 351). Here, the NLRA’s prohibition on enforcing
the “separate proceedings” clause has nothing to do with the
adequacy of arbitration. The dissent and Ernst & Young
attempt to read Concepcion for the proposition that concerted
claims and arbitration are fundamentally inconsistent. But
Concepcion makes no such holding. Concepcion involved a
consumer arbitration contract, not a labor contract, and there
was no federal statutory scheme that declared the contract
terms illegal. 563 U.S. at 338. The defense in that case was
based on a judge-made state law rule. In contrast, the
illegality of the contract term here follows directly from the
NLRA. Arbitration between groups of employees and their
employers is commonplace in the labor context. It would no
doubt surprise many employers to learn that individual
proceedings are a “fundamental” attribute of workplace
arbitration. See also Gilmer, 500 U.S. at 32 (noting that
employer’s arbitration “rules also provide for collective
proceedings”).15

   Third, the enforcement defense in this case does not
specially “disfavor” arbitration. The dissent makes dire
predictions about the future of workplace arbitration if the

 15
    The dissent suggests that employee-claimants could act in “concert”
by simply hiring the same lawyers. This is not what the NLRA
contemplates by the term “concert.” An employer could not, for example,
require its employees to sign a pledge not to join a union but remain in
conformity with the NLRA by suggesting that employees hire similar
attorneys to represent them in wage negotiations. See also City Disposal
Sys., 465 U.S. at 834–35 (discussing the term “concert” in federal labor
law at the time of the NLRA’s passage).
                MORRIS V. ERNST & YOUNG                      25

“separate proceedings” clause is invalidated. However, our
holding is not that arbitration may not be used in workplace
disputes. Quite the contrary. Rather, our holding is simply
that when arbitration or any other mechanism is used
exclusively, substantive federal rights continue to apply in
those proceedings. The only role arbitration plays in today’s
case is that it happens to be the forum the Ernst & Young
contract specifies as exclusive. The contract here would face
the same NLRA troubles if Ernst & Young required its
employees to use only courts, or only rolls of the dice or tarot
cards, to resolve workplace disputes—so long as the
exclusive forum provision is coupled with a restriction on
concerted activity in that forum. At its heart, this is a labor
law case, not an arbitration case.

    Further, nothing in the Supreme Court’s recent arbitration
case law suggests that a party may simply incant the acronym
“FAA” and receive protection for illegal contract terms
anytime the party suggests it will enjoy arbitration less
without those illegal terms. We have already held that
Concepcion supports no such argument:

       The Supreme Court’s holding that the
       FAA preempts state laws having a
       “disproportionate impact” on arbitration
       cannot be read to immunize all arbitration
       agreements from invalidation no matter how
       unconscionable they may be, so long as they
       invoke the shield of arbitration. Our court has
       recently explained the nuance: “Concepcion
       outlaws discrimination in state policy that is
       unfavorable to arbitration.”
26                 MORRIS V. ERNST & YOUNG

Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 927 (9th Cir.
2013) (quoting Mortensen v. Bresnan Commc’ns, LLC, 722
F.3d 1151, 1160 (9th Cir.2013)). Do not be misled.
Arbitration is consistent with, and encouraged by, the NLRA
following today’s opinion.

    At bottom, the distinguishing features of today’s case are
simple. The NLRA establishes a core right to concerted
activity. Irrespective of the forum in which disputes are
resolved, employees must be able to act in the forum
together. The structure of the Ernst & Young contract
prevents that. Arbitration, like any other forum for resolving
disputes, cannot be structured so as to exclude all concerted
employee legal claims. As the Supreme Court has instructed,
when “private contracts conflict with” the NLRA, “they
obviously must yield or the Act would be reduced to a
futility.” J.I. Case, 321 U.S. at 337.16

                                   III

    In sum, the “separate proceedings” provision of the Ernst
& Young contract interferes with a substantive federal right
protected by the NLRA’s § 7. The NLRA precludes contracts
that foreclose the possibility of concerted work-related legal
claims. An employer may not condition employment on the
requirement that an employee sign such a contract.


 16
    We recognize that our sister Circuits are divided on this question. We
agree with the Seventh Circuit, the only one that “has engaged
substantively with the relevant arguments.” Epic Sys., 823 F.3d at 1159;
but see Murphy Oil II, 808 F.3d at 1018 (enforcing employer’s concerted
action waiver under the FAA); Sutherland v. Ernst & Young LLP,
726 F.3d 290, 297 n.8 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d
1050, 1053–54 (8th Cir. 2013).
                   MORRIS V. ERNST & YOUNG                             27

    It is “well established . . . that a federal court has a duty
to determine whether a contract violates the law before
enforcing it.” Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83
(1982). Because the district court’s order compelling
arbitration was based, at least in part, on the separate
proceedings provision, we must vacate the order and remand
to the district court to determine whether the “separate
proceedings” clause is severable from the contract. We take
no position on whether arbitration may ultimately be required
in this case.

     In addition, because the contract’s conflict with the
NLRA is determinative, we need not—and do not—reach
plaintiff’s alternative arguments regarding the Norris
LaGuardia Act, the FLSA, or whether Ernst & Young waived
its right to arbitration.17

      REVERSED AND REMANDED.



IKUTA, Circuit Judge, dissenting:

    Today the majority holds that § 7 of the National Labor
Relations Act (NLRA) precludes employees from waiving the
right to arbitrate their disputes collectively, thus striking at
the heart of the Federal Arbitration Act’s (FAA) command to
enforce arbitration agreements according to their terms. This
decision is breathtaking in its scope and in its error; it is


 17
    Putative-amici labor scholars’ motion for leave to file an amicus brief
is denied. See Fed. R. App. P. 29(e). The motion for judicial notice of
additional authorities is also denied. See Louis Vuitton Malletier, S.A. v.
Akanoc Sols., Inc., 658 F.3d 936, 940 n.2 (9th Cir. 2011).
28              MORRIS V. ERNST & YOUNG

directly contrary to Supreme Court precedent and joins the
wrong side of a circuit split. I dissent.

                               I

    The plaintiffs in this case, Stephen Morris and Kelly
McDaniel, entered into an agreement with Ernst & Young
that included a program for resolving covered disputes. The
parties agreed that the program was “the sole method for
resolving disputes within its coverage.” Under the program,
the parties agreed they would first try to resolve a covered
dispute by mediation. If that failed, either party could choose
to proceed to binding arbitration. The agreement set forth the
applicable procedures. Subparagraph K provided:

       Separate Proceedings. If there is more than
       one Covered Dispute between the Firm and an
       Employee, all such Covered Disputes may be
       heard in a single proceeding. Covered
       Disputes pertaining to different Employees
       will be heard in separate proceedings.

As the Supreme Court has explained, such a waiver of class
actions is typical in the arbitration context because the class
procedural mechanism “interferes with fundamental attributes
of arbitration and thus creates a scheme inconsistent with the
FAA.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
344 (2011). Among other problems, “there is little incentive
for lawyers to arbitrate on behalf of individuals when they
may do so for a class and reap far higher fees in the process.”
Id. at 347. Class mechanisms also eviscerate the principal
benefits of arbitration — speed and informality, “mak[ing]
the process slower, more costly, and more likely to generate
procedural morass than final judgment.” Id. at 348.
                  MORRIS V. ERNST & YOUNG                         29

    Notwithstanding the agreement to arbitrate, Morris
brought a complaint in federal district court alleging that
Ernst & Young had violated the Fair Labor Standards Act
(FLSA) and analogous state law by improperly classifying
him and other employees as exempt employees who were not
entitled to overtime wages. (McDaniel was later added as a
plaintiff.) Morris purported to bring the action as a class
action under Rule 23 of the Federal Rules of Civil Procedure
and as a collective action under 29 U.S.C. § 216(b) of the
FLSA.1 After some procedural complications not relevant
here, Ernst & Young moved to compel arbitration under its
agreement. Morris argued that the “Separate Proceedings”
clause of his agreement violated § 7 of the NLRA. The
district court rejected this argument. In reversing, the
majority holds that employees may not be required to waive
the use of a class action mechanism in arbitrating or litigating
their claims. To the extent the Supreme Court has held that
class actions are inconsistent with arbitration, see
Concepcion, 563 U.S. at 344, the majority effectively cripples


  1
    Section 216(b) provides a class action mechanism similar to that
contemplated by Rule 23, although it requires voluntary opt in by the
members of the class. It states, in pertinent part:

        An action to recover the liability prescribed in
        [§ 216(b)] may be maintained against any employer
        (including a public agency) in any Federal or State
        court of competent jurisdiction by any one or more
        employees for and in behalf of himself or themselves
        and other employees similarly situated. No employee
        shall be a party plaintiff to any such action unless he
        gives his consent in writing to become such a party and
        such consent is filed in the court in which such action
        is brought.

29 U.S.C. § 216(b).
30              MORRIS V. ERNST & YOUNG

the ability of employers and employees to enter into binding
agreements to arbitrate.

                              II

    Under the FAA, agreements to arbitrate are “valid,
irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.”
9 U.S.C. § 2; Concepcion, 563 U.S. at 339. As the Supreme
Court has repeatedly explained, the FAA was enacted to
overcome “widespread judicial hostility to arbitration
agreements.” Concepcion, 563 U.S. at 339. The Supreme
Court’s cases have “repeatedly described the Act as
embod[ying] [a] national policy favoring arbitration and a
liberal federal policy favoring arbitration agreements.” Id. at
346 (internal quotation marks and citations omitted). The
FAA’s national policy applies to the states, see, e.g.,
Southland Corp. v. Keating, 465 U.S. 1, 10 (1984), and
forecloses any state statute or common law rule that attempts
“to undercut the enforceability of arbitration agreements,” id.
at 16, unless the savings clause in § 2 is applicable, see
Concepcion, 563 U.S. at 344; Perry v. Thomas, 482 U.S. 483,
492 n.9 (1987). Therefore, when a party claims that a state
law prevents the enforcement of an arbitration agreement, the
court must determine whether that law is preempted by the
FAA or is rescued from preemption by the FAA’s savings
clause. See Concepcion, 563 U.S. at 339–42.

    But when a party claims that a federal statute makes an
arbitration agreement unenforceable, the Supreme Court takes
a different approach. In determining whether the FAA’s
mandate requiring “courts to enforce agreements to arbitrate
according to their terms” has been overridden by a different
federal statute, the Supreme Court requires a showing that
                  MORRIS V. ERNST & YOUNG                          31

such a federal statute includes an express “contrary
congressional command.”             CompuCredit Corp. v.
Greenwood, 132 S. Ct. 665, 669 (2012) (internal quotation
marks omitted). The burden is on the party challenging the
arbitration agreement to show that Congress expressly
intended to preclude a waiver of the judicial forum. Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). “If
such an intention exists, it will be discoverable in the text of
the [federal act], its legislative history, or an ‘inherent
conflict’ between arbitration and the [federal act’s]
underlying purposes.” Id. “Throughout such an inquiry, it
should be kept in mind that ‘questions of arbitrability must be
addressed with a healthy regard for the federal policy
favoring arbitration.’” Id. (quoting Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).

    Contrary to the majority’s focus on whether the NLRA
confers “substantive rights,” in every case considering a
party’s claim that a federal statute precludes enforcement of
an arbitration agreement, the Supreme Court begins by
considering whether the statute contains an express “contrary
congressional command” that overrides the FAA. See, e.g.,
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304,
2309 (2013); CompuCredit, 132 S. Ct. at 669, Gilmer,
500 U.S. at 29.2 To date, in every case in which the Supreme
Court has conducted this analysis of federal statutes, it has
harmonized the allegedly contrary statutory language with the
FAA and allowed the arbitration agreement at issue to be



  2
   The Supreme Court has applied the same approach, and reached the
same conclusion, in upholding a collective bargaining agreement with a
mandatory arbitration clause governed by the NLRA. See 14 Penn Plaza
LLC v. Pyett, 556 U.S. 247, 265–74 (2009).
32                  MORRIS V. ERNST & YOUNG

enforced according to its terms.3 Thus in CompuCredit, the
Court considered a purported “contrary congressional
command” in the Credit Repair Organization Act (CROA),
15 U.S.C. § 1679 et seq., which the plaintiffs claimed
precluded consumers from entering an arbitration agreement
that waived their right to litigate an action in a judicial forum.
132 S. Ct. at 669. The plaintiffs pointed to the language in
CROA that required a business to tell a consumer that “[y]ou
have a right to sue,” 15 U.S.C. § 1679c(a), that provided for
actual and punitive damages in both individual legal actions
and class actions, id. § 1679g, and that provided that “[a]ny
waiver by any consumer of any protection provided by or any
right of the consumer” was void and could “not be enforced
by any Federal or State court,” id. § 1679f(a).

    The Supreme Court rejected this claim. Overruling the
Ninth Circuit, the Court held that had Congress meant to
prohibit arbitration clauses, “it would have done so in a
manner less obtuse than what respondents suggest.”
CompuCredit, 132 S. Ct. at 672. According to the Court,
when Congress wants to restrict the use of arbitration “it has
done so with a clarity that far exceeds the claimed indications
in the CROA.” Id. The Supreme Court gave two examples
of what would constitute a sufficiently clear “contrary
congressional command”:



 3
   Only Wilko v. Swan held that the Securities Act of 1933 contained an
unwaivable right to a judicial forum for claims under the Act, thereby
precluding the enforcement of an arbitration agreement between parties to
a sale of securities. 346 U.S. 427, 432–37 (1953). But the Court
expressly overruled Wilko in Rodriguez de Quijas v. Shearson/Am.
Express, Inc., rejecting its reasoning as “pervaded . . . by the old judicial
hostility to arbitration.” 490 U.S. 477, 480 (1989) (internal quotation
marks omitted); see also Pyett, 556 U.S. at 266–67.
                MORRIS V. ERNST & YOUNG                      33

    “No predispute arbitration agreement shall be valid or
enforceable, if the agreement requires arbitration of a dispute
arising under this section.” Id. (quoting 7 U.S.C. § 26(n)(2)
(2006 ed., Supp. IV)).

    “Notwithstanding any other provision of law, whenever
a motor vehicle franchise contract provides for the use of
arbitration to resolve a controversy arising out of or relating
to such contract, arbitration may be used to settle such
controversy only if after such controversy arises all parties to
such controversy consent in writing to use arbitration to settle
such controversy.” Id. (quoting 15 U.S.C. § 1226(a)(2) (2006
ed.)).

     Because the language in the two CROA provisions cited
by plaintiffs did not expressly state that a predispute
arbitration agreement was unenforceable, the Court
determined that they were consistent with enforcement of an
arbitration agreement. The “right to sue” language, for
instance, merely allowed parties to enter into an agreement
requiring initial arbitral adjudication, which then could be
reviewed in a court of law. Id. at 670–71. Because the
CROA was “silent on whether claims under the Act can
proceed in an arbitrable forum,” the Court held that “the FAA
requires the arbitration agreement to be enforced according to
its terms.” Id. at 673.

    In Gilmer, plaintiffs claimed the Age Discrimination in
Employment Act of 1967 (ADEA) contained a contrary
congressional command to the FAA’s mandate. 500 U.S. at
27–30. Specifically, the plaintiffs pointed to language
allowing employees to litigate in court as providing an
unwaivable right to access a judicial forum: “[a]ny person
aggrieved may bring a civil action in any court of competent
34               MORRIS V. ERNST & YOUNG

jurisdiction for such legal or equitable relief as will effectuate
the purpose of this chapter,” 29 U.S.C. § 626(c)(1); Gilmer,
500 U.S. at 27. They also pointed to language they claimed
precluded employees from waiving the right to bring a class
action: “The provisions of this chapter shall be enforced in
accordance with the powers, remedies, and procedures
provided in section . . . 216,” 29 U.S.C. § 626(b), where
§ 216(b) (also at issue here) states that an action under the
FLSA may be brought in court “by any one or more
employees for and in behalf of himself or themselves and
other employees similarly situated,” although the represented
employees must consent. In other words, the plaintiffs
argued that because the ADEA explicitly provided for a class
mechanism, the statute precluded the enforcement of an
arbitration agreement that included a class action waiver.

    The Supreme Court rejected this argument. Once again,
the statutory language was not sufficiently clear to prevent
the enforcement of arbitration agreements that included a
class action waiver. Looking closely at the text of the statute,
the Court noted that while Congress allowed for judicial
resolution of claims, it “did not explicitly preclude arbitration
or other nonjudicial resolution of claims.” Gilmer, 500 U.S.
at 27–29. Moreover, “the fact that the [ADEA] provides for
the possibility of bringing a collective action does not mean
that individual attempts at conciliation were intended to be
barred.” Id. at 32. Thus, the language on which the plaintiffs
relied was entirely consistent with enforcing an arbitration
agreement that precluded a class mechanism. See also Italian
Colors, 133 S. Ct. at 2311 (“In Gilmer . . . we had no qualms
in enforcing a class waiver in an arbitration agreement even
though the federal statute at issue . . . expressly permitted
collective actions.”). Turning to the ADEA’s legislative
history, the Supreme Court found nothing showing a
                MORRIS V. ERNST & YOUNG                     35

congressional intention to preclude waiver of a judicial
forum. Gilmer, 500 U.S. at 29. Indeed, the Court found in
the ADEA a “flexible approach to resolution of claims” and
other indicia that Congress did not intend to preclude
individual arbitration of disputes. Id. at 29–31.

    Finally, in Italian Colors, there was a purported “inherent
conflict,” Gilmer, 500 U.S. at 26, between arbitration and the
policies underlying the Sherman and Clayton Acts, 133 S. Ct.
at 2310–12. According to plaintiffs, the cost of individually
arbitrating their antitrust claims would so far exceed the
potential recovery that requiring them to litigate their claims
individually would render the plaintiffs unable to vindicate
their federal statutory rights. Id. The Supreme Court rejected
this argument. Examining the text of the acts, the Court
noted that the federal acts “make no mention of class
actions,” and were “enacted decades before the advent of
Federal Rule of Civil Procedure 23.” Id. at 2309. The Court
gave even less weight to the plaintiffs’ policy arguments.
With respect to the argument that “federal law secures a
nonwaivable opportunity to vindicate federal policies by
satisfying the procedural strictures of Rule 23 or invoking
some other informal class mechanism in arbitration,” the
Court simply stated that “we have already rejected that
proposition” in Concepcion. Id. at 2310. In Concepcion, the
Court made clear that the FAA allows parties to waive the use
of a class mechanism because such a mechanism “interferes
with fundamental attributes of arbitration.” 563 U.S. at 344.

    In sum, the Supreme Court consistently rejects claims that
a “contrary congressional command” precludes courts from
enforcing arbitration agreements according to their terms,
including when such agreements waive the use of class
mechanisms. In analyzing such arguments, the Court has
36                 MORRIS V. ERNST & YOUNG

focused primarily on a single question: whether the text of the
federal statute at issue expressly precludes the use of a
predispute arbitration agreement for the underlying claims at
issue. If the statute does not, the Court’s “healthy regard for
the federal policy favoring arbitration,” Moses H. Cone,
460 U.S. at 24, leads it to conclude that there is no such
contrary command, and the Court reads the purportedly
contrary federal statute to allow the enforcement of the
agreement to arbitrate. The Court has likewise rejected
claims that the legislative history or policy of the federal
statute requires a different result. See Green Tree Fin. Corp.
v. Randolph, 531 U.S. 79, 89–90 (2000) (noting that the Court
has “rejected generalized attacks on arbitration that rest on
‘suspicion of arbitration as a method of weakening the
protections afforded in the substantive law to would-be
complainants.’” (quoting Rodriguez de Quijas v.
Shearson/Am. Express, Inc., 490 U.S. 477, 481 (1989))).

                                  III

     Here, the majority ignores the thrust of Supreme Court
precedent and declares that arbitration is precluded because
it interferes with a substantive right protected by § 7 and § 8
of the NLRA.4 Section 7 states:




  4
    Although the majority cites Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837 (1984), it does not defer to the NLRB’s
interpretation of § 7 as overriding the command of the FAA in In re D.R.
Horton v. NLRB, 357 NLRB No. 184 (2012), which was subsequently
overruled by the Fifth Circuit. See D.R. Horton v. NLRB, 737 F.3d 344
(5th Cir. 2013). Rather, the majority states that “the NLRA is
unambiguous, and there is no need to proceed to the second step of
Chevron.” Maj. Op. at 13.
                MORRIS V. ERNST & YOUNG                      37

        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 merely makes 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(a).

                               A

    Nothing in this language comes remotely close to the
examples of contrary congressional commands the Supreme
Court identified in CompuCredit, where Congress expressly
stated that “[n]o predispute arbitration agreement shall be
valid or enforceable.” 132 S. Ct. at 672. The language of § 7
and § 8 of the NLRA neither mention arbitration nor specify
the right to take legal action at all, whether individually or
collectively. See Italian Colors, 133 S. Ct. at 2309 (“The
Sherman and Clayton Acts make no mention of class
actions.”). Applying Supreme Court precedent, we must
conclude there is no “contrary congressional command” in
the text of the NLRA.

    Moreover, contrary to the majority, Maj. Op. at 6, nothing
in either § 7 or § 8 creates a substantive right to the
availability of class-wide claims that might be contrary to the
FAA’s mandate. While the NLRA protects concerted
activity, it does not give employees an unwaivable right to
proceed as a group to arbitrate or litigate disputes. Rather, as
38                 MORRIS V. ERNST & YOUNG

in CompuCredit and Gilmer, the language can be harmonized
with enforcement of an arbitration agreement that waives
class action mechanisms. According to a dictionary roughly
contemporaneous with the passage of the NLRA, “concerted”
action is action that is “mutually contrived or planned: agreed
on.” Webster’s International Dictionary of the English
Language 295 (1903 ed.). A natural reading of § 7’s right “to
engage in other concerted activities for the purpose of
collective bargaining or other mutual aid or protection”
enables employees to jointly arrange, plan, and carry out
group efforts to dispute employer positions. In a legal
context, this could include joint legal strategies, shared
arguments and resources, hiring the same attorneys, or even
requesting the Department of Labor to bring an independent
action against the employer. But the language does not
expressly preserve any right for employees to use a specific
procedural mechanism to litigate or arbitrate disputes
collectively; even less does it create an unwaivable right to
such mechanism. Indeed, the text provides no basis for the
majority’s conclusion that § 7 gives employees a substantive,
unwaivable right to use Rule 23, § 216(b) of the FLSA, or
any other procedural mechanism that might be available for
bringing class-wide actions.5 Accordingly, the Supreme
Court’s precedent compels the conclusion that neither § 7 nor
§ 8 contains a “contrary congressional command” that
precludes enforcing Morris’s arbitration agreement according
to its terms. If this were not the case, the Court’s statement

  5
     The majority claims that Eastex, Inc. v. NLRB, 437 U.S. 556, 566
(1978), conclusively supports its view that § 7 of the NLRA includes a
substantive right to class action procedures. Maj. Op. at 10–11 n.3. This
is incorrect. The Court declined to delineate the rights that are provided
by § 7 in an administrative or judicial forum, stating: “We do not address
here the question of what may constitute ‘concerted’ activities in this
context.” Eastex, Inc., 437 U.S. at 566 n.15.
                MORRIS V. ERNST & YOUNG                      39

that Gilmer “had no qualms in enforcing a class waiver in an
arbitration agreement even though the federal statute at issue,
the Age Discrimination in Employment Act, expressly
permitted collective actions,” Italian Colors, 133 S. Ct. at
2311, would be meaningless. Under the majority’s reasoning,
regardless whether a class action waiver survives express
language in the ADEA, as Gilmer held, the waiver
nevertheless is unenforceable in every action by an employee
against an employer due to the unwaivable right to class
procedures in the NLRA.

    Nor does the legislative history of the NLRA demonstrate
an intent to preclude individual resolution of disputes. The
NLRA was enacted decades before Rule 23 created the
modern class action in 1966. As the Fifth Circuit observed,
in enacting the NLRA “Congress did not discuss the right to
file class or consolidated claims against employers,” and
therefore “the legislative history also does not provide a basis
for a congressional command to override the FAA.” D.R.
Horton, Inc. v. NLRB, 737 F.3d 344, 361 (5th Cir. 2013). The
majority does not cite any legislative history to the contrary.

    Finally, there is no “inherent conflict between arbitration”
and the “underlying purposes” of the NLRA. Gilmer,
500 U.S. at 26. The majority argues that the very purpose of
the NLRA is to enable employees to engage in concerted
activity, and therefore, it necessarily also has the purpose of
enabling employees to engage in collective legal activity,
including class actions. Maj. Op. at 9–10. Even assuming
that concerted action is “the basic tenet of federal labor
policy,” id. at 10, nothing in the NLRA suggests that this
protection includes the right to resolve disputes using a
particular legal procedure. The majority’s attempt to equate
a substantive right to concerted action with a legal procedural
40               MORRIS V. ERNST & YOUNG

mechanism for resolving disputes has no basis in history or
Supreme Court precedent. To the contrary, the Court has
held that “the right of a litigant to employ Rule 23 is a
procedural right only, ancillary to the litigation of substantive
claims.” Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326,
332 (1980). Moreover, as the Fifth Circuit pointed out, there
is “limited force to the argument that there is an inherent
conflict between the FAA and NLRA when the NLRA would
have to be protecting a right of access to a procedure that did
not exist when the NLRA was (re)enacted.” D.R. Horton,
737 F.3d at 362. Indeed, as the majority acknowledges,
“federal labor policy favors and promotes arbitration.” Maj.
Op. at 16 (emphasis added). See United Steelworkers of Am.
v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578 (1960)
(“[A]rbitration of labor disputes under collective bargaining
agreements is part and parcel of the collective bargaining
process itself.”); Pyett, 556 U.S. at 257 (“Parties generally
favor arbitration precisely because of the economics of
dispute resolution.”).

    In sum, nothing in the text, legislative history, or purposes
of § 7 precludes enforcement of an arbitration agreement
containing a class action waiver.

                               B

    In order to avoid this conclusion, the majority disregards
the Supreme Court’s guidance, and instead conflates the
question whether “the FAA’s mandate has been overridden
by a contrary congressional command,” CompuCredit, 132 S.
Ct. at 669 (internal quotation marks omitted), with the
question whether an employee’s agreement to arbitrate
individually is invalid under the FAA’s savings clause,
9 U.S.C. § 2 (providing that an agreement to arbitrate “shall
                MORRIS V. ERNST & YOUNG                     41

be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract”). The majority reasons that: (1) the “Separate
Proceedings” requirement in Morris’s contract that all
disputes must be resolved individually is illegal because it
violates the NLRA; (2) a party may raise a defense that a
contract provision is illegal, and such a defense is generally
applicable and not related specifically to arbitration
agreements; and therefore (3) in response to Ernst & Young’s
motion to compel arbitration, Morris’s defense that the
“Separate Proceedings” requirement is illegal is preserved by
the FAA’s savings clause. In adopting this line of reasoning,
the majority joins the Seventh Circuit (the only circuit with
which the majority agrees). See Lewis v. Epic Sys. Corp.,
— F.3d — , 2016 WL 3029464 (7th Cir. 2016) (holding that
§ 7 of the NLRA mandates collective legal action for
employees, and therefore an arbitration agreement waiving
such collective legal action is “illegal” and thus
unenforceable under the FAA’s savings clause.)

    This reasoning is contrary to the Supreme Court’s FAA
jurisprudence. Maj. Op. at 14–17. First, the Supreme Court
does not apply the savings clause to federal statutes; rather,
it considers whether Congress has exercised its authority to
override the FAA’s mandate to enforce arbitration
agreements according to their terms. See CompuCredit,
132 S. Ct. at 669. If there is no “contrary congressional
command,” i.e., an express statement such as “[n]o predispute
arbitration agreement shall be valid or enforceable,” id., then
the Supreme Court will conclude that the federal statute at
issue can be harmonized with the FAA. Second, the
majority’s reasoning is specious because it is based on the
erroneous assumption that the waiver of the right to use a
collective mechanism in arbitration or litigation is “illegal.”
42              MORRIS V. ERNST & YOUNG

But such a waiver would be illegal only if it were precluded
by a “contrary congressional command” in the NLRA, and
here there is no such command.

     Moreover, even if the FAA’s savings clause were
applicable to a federal statute, the majority’s construction of
§ 7 and § 8 of the NLRA as giving employees a substantive,
nonwaivable right to classwide actions would not be saved
under that clause. As Concepcion explained, such a
purported right would disproportionately and negatively
impact arbitration agreements by requiring procedures that
“interfere[] with fundamental attributes of arbitration.”
Concepcion, 563 U.S. at 344. Because class procedures are
generally “incompatible with arbitration,” id. at 351, and
“nothing in [the FAA’s savings clause] suggests an intent to
preserve [defenses] that stand as an obstacle to the
accomplishment of the FAA’s objectives,” such rules do not
fall within the confines of the savings clause, id. at 343. The
majority’s argument that the nonwaivable right to class-wide
procedures it has discerned in § 7 applies equally to
arbitration and litigation and so is saved by the § 2 savings
clause, Maj. Op. at 16–17, was expressly rejected in
Concepcion, see 563 U.S. at 338 (rejecting plaintiffs’
argument that a state rule prohibiting class action waivers in
adhesion contracts applied equally to judicial and arbitral
proceedings and thus fit the § 2 savings clause).

    The majority’s erroneous reasoning leads to a result that
is directly contrary to Congress’s goals in enacting the FAA.
Given that lawyers are unlikely to arbitrate on behalf of
individuals when they can represent a class, see id., 563 U.S.
at 347, and an arbitrator cannot hear a class arbitration unless
such a proceeding is explicitly provided for by agreement,
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662,
                MORRIS V. ERNST & YOUNG                      43

684 (2010), the employee’s purported nonwaivable right to
class-wide procedures virtually guarantees that a broad swath
of workplace claims will be litigated, Concepcion, 563 U.S.
at 347. The majority’s reasoning is likewise contrary to the
Supreme Court’s ruling that collective actions are not
necessary to protect employees’ federal statutory rights. See
Gilmer, 500 U.S. at 32; see also Circuit City Stores, Inc.
Adams, 532 U.S. 105, 123 (2001) (“We have been clear in
rejecting the supposition that the advantages of the arbitration
process somehow disappear when transferred to the
employment context.”).

                              IV

    The Second, Fifth, and Eight Circuits have concluded that
the NLRA does not invalidate collective action waivers in
arbitration agreements. See Cellular Sales of Missouri, LLC
v. NLRB, — F.3d — , 2016 WL 3093363, at *2 (8th Cir.
2016); D.R. Horton, 737 F.3d at 362; Sutherland v. Ernst &
Young LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013). These
decisions are consistent with Supreme Court precedent, which
has made it abundantly clear that arbitration agreements must
be enforced according to their terms unless Congress has
given an express contrary command.

    In teasing out of the NLRA a “mandate” that prevents the
enforcement of Morris’s arbitration agreement, the majority
exhibits the very hostility to arbitration that the FAA was
passed to counteract. The Court recognized in Concepcion
that the pre-FAA judicial antagonism to arbitration
agreements “manifested itself in ‘a great variety’ of ‘devices
and formulas’ declaring arbitration against public policy.”
563 U.S. at 342 (quoting Robert Lawrence Co. v. Devonshire
Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959)). Today the
44              MORRIS V. ERNST & YOUNG

majority invents a new such formula. Because I would
follow the Supreme Court precedent and join the majority of
the circuits concluding that § 7 of the NLRA does not prevent
the collective action waiver at issue here, I would hold that
Morris’s contract must be enforced according to its terms. I
therefore dissent.
