The Fifth Circuit Court of Appeals recently handed a victory to
employers in D.R. Horton, Inc. v. National Labor Relations
Board, 12-60031, 2013 W.L. 6231617 (5th Cir. Dec.
3, 2013), reversing an Order of the National Labor Relations Board
(NLRB) that class action waivers in arbitration agreements violate
Section 8(a)(1) of the National Labor Relations Act (NLRA). The
Fifth Circuit now joins the Second, Eighth and Ninth Circuits in
stating, either expressly or impliedly, that arbitration agreements
containing class action waivers do not violate the NLRA.
D.R. Horton employees signed mandatory arbitration agreements
pursuant to which they waived their rights to participate in class
or collective actions. The NLRB concluded that such agreements
interfere with employee rights to engage in concerted activity. The
Fifth Circuit and other circuit courts ruled, however, that the
Federal Arbitration Act (FAA)'s strong support of arbitration
agreements took precedence over the NLRA.
The FAA requires that arbitration agreements must be enforced
according to their terms. There are two exceptions to the FAA's
general rule favoring arbitration agreements: (1) if grounds exist
at law or in equity to revoke the arbitration agreement (called the
FAA "savings clause"); or (2) if there is a congressional
command contrary to the FAA. The NLRB had invoked the FAA's
savings clause to conclude that class action waivers violated the
On petition for review of the NLRB decision, the Fifth Circuit
found that neither the FAA's savings clause nor any
congressional command mandated the NLRB's interpretation
prohibiting class action waivers. First, with respect to the
savings clause, the Fifth Circuit cited to the United States
Supreme Court opinion in AT&T Mobility v. Concepcion,
131 S. Ct. 1740 (2011), in concluding that the NLRB's
interpretation prohibiting class action arbitration waivers
interferes with the "fundamental attributes of arbitration and
thus creates a scheme inconsistent with the FAA." D.R.
Horton, 2013 WL 6231617, at * 11 (quoting Concepcion,
131 S. Ct. at 1748).
Second, after examining the NLRA's text, legislative history
and purpose, the Fifth Circuit concluded that the NLRA does not
contain a congressional command overriding application of the FAA.
The court held that the NLRB's decision was not entitled to
judicial deference because it purported to affect a federal statute
unrelated to the NLRA – the FAA.
Notably, the Fifth Circuit did enforce a separate NLRB Order
that D.R. Horton's arbitration agreement violated Section
8(a)(1) of the NLRA because an employee could reasonably interpret
the ambiguous language of that arbitration agreement as prohibiting
the filing of any unfair labor practice charge with the NLRB. As a
result, D.R. Horton was required to clarify with its employees that
the arbitration agreement did not affect their rights to pursue
claims of unfair labor practices with the NLRB.
This decision bolsters employers' use of collective action
waivers in mandatory arbitration agreements. The Third Circuit
Court of Appeals has not decided this issue yet, but we expect more
courts to do so in the coming years. In implementing class action
waivers, employers should be careful to provide an exception for
unfair labor practice charges.
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