In October of last year,
we told you about AT&T Mobility v. Concepcion, in
which the United States Supreme Court upheld the use of a class
action waiver in a consumer arbitration agreement. In light of this
decision, we encouraged employers to consider adding such waivers
to their arbitration agreements or entering into arbitration
agreements with class action waivers if they did not already have
them. The National Labor Relations Board (NLRB), however, recently
made clear that it has a different opinion about whether
Concepcion, a consumer case, is applicable in the
employment context. Employers with or considering class action
waivers in their arbitration agreements should pay attention to
this increasingly unsettled area of the law.
In 2006, a national home building company, D.R. Horton, Inc.
started requiring its new and current employees to sign arbitration
agreements. The agreements included a prohibition against employees
participating in or bringing class action claims, in arbitration or
in court. When a supervisor who believed he had been misclassified
as such requested arbitration on behalf of similarly situated
employees, the employer argued that the employee and his co-workers
had waived their right to bring such a claim. The supervisor then
filed a complaint with the National Labor Relations Board (NLRB),
arguing that the arbitration agreement violated the National Labor
Relations Act (NLRA).
Last week, the NLRB issued its ruling, agreeing with the
supervisor and concluding that the class action waiver in D.R.
Horton Inc.'s arbitration agreement violated the employees'
rights under Section 7 of the National Labor Relations Act by
limiting their ability to engage in "concerted activity."
The NLRB further concluded that the class action waiver clause
could be interpreted as prohibiting employees from filing an unfair
labor practice charge with the Board, another violation of the
The NLRB determined that neither the Federal Arbitration Act
(FAA) nor the Concepcion case precluded its decision. It
reasoned that while the FAA allows employers and employees to enter
into individual arbitration agreements, it does not require those
employees to give up substantive rights protected by other
The NLRB made clear that employers may continue to require
arbitration of individual claims. It also said that employers do
not necessarily have to permit class-wide arbitration, but they
cannot bar both class arbitration and class action lawsuits,
leaving employees with no route to a collective action.
(Interestingly, the decision does not say whether employers can
require employees to waive class claims in court, while continuing
to allow class claims in arbitration.)
Like any other NLRB ruling, this ruling applies both to union
and non-union employers under the jurisdiction of the NLRB. This
ruling will undoubtedly be reviewed by an appellate court, with a
United States Supreme Court decision possible someday as well. For
now, however, if you have agreements with your employees to
arbitrate their claims, and those agreements include class action
waivers, you risk unfair labor practice charges if you seek to
enforce those waivers.
The January 3 decision came at the very end of the term of Board
Member Craig Becker, whose recess appointment expired last week.
Since then President Obama has made three new recess appointments
to the NLRB. Without these appointments, the NLRB would have been
down to two members and therefore unable to act. However, by
bypassing the Senate, many constitutional experts believe the
President has violated his recess appointment authority under
Article II, Section 2 of the U.S. Constitution because the Senate
is not in "recess." Employers will continue to face
enormous uncertainty until the validity of these appointments is
resolved, and it may take months for an appropriate case to result
in a court decision on this point. In the meantime, what remains
clear is that the President and the NLRB will continue to push a
strongly pro-labor agenda.
We will post developments as they occur. In the meantime, if you
have questions about the D.R. Horton decision or arbitration
agreements and class action waivers generally, please contact Katy
Rand or another member of Pierce Atwood's Employment Group.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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