Appeals Court Holds that NLRA Does Not Prevent Waivers of Class Actions

As we noted in our August 15, 2013 e-lert, although the federal courts have generally upheld employee agreements to proceed individually, rather than as part of a class or collective action, on arbitration of employment claims, the National Labor Relations Board (NLRB) has held that such agreements violate the National Labor Relations Act. The NLRB bases its position on its decision in D. R. Horton, 357 NLRB No. 184 (2012). D.R. Horton, the employer, sought review by the U.S. Fifth Circuit Court of Appeals, arguing that the NLRB did not take the Federal Arbitration Act fully into account. Last week, in a long-awaited decision directly on this issue, the U.S. Court of Appeals for the Fifth Circuit agreed. The Fifth Circuit summarized its ruling as follows:

The National Labor Relations Board held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that, among other things, prohibited an employee from pursuing claims in a collective or class action. On petition for review, we disagree and conclude that the Board’s decision did not give proper weight to the Federal Arbitration Act. We uphold the Board, though, on requiring Horton to clarify with its employees that the arbitration agreement did not eliminate their rights to pursue claims of unfair labor practices with the Board.

Because one of the three members of the 3-judge, appeal panel disagreed with the majority’s holding on whether class arbitration waivers can be required of employees, it is likely that the NLRB will ask that the other judges of the Fifth Circuit, review the panel decision. While the panel decision might be reversed on review, the Fifth Circuit’s decision is consistent with other appellate courts that have considered the issue.

This is good news for employers who utilize arbitration agreements, particularly if those agreements do not provide for class/collective action. Such employers should make sure that claims pursued through the NLRB, are not included in the arbitration agreement. As a note of caution, however, the NLRB has at times in the past, ignored certain court of appeals decisions and may continue to find such agreements unlawful until the Supreme Court, or a majority of courts of appeals, adopt the Fifth Circuit’s holding.