In January 2012, the National Labor Relations Board ("NLRB") ruled in D.R. Horton, Inc. that a mandatory arbitration agreement preventing employees from pursuing class or collective claims against their employer was unlawful under the National Labor Relations Act ("NLRA"). We previously discussed that decision in our January 11, 2012 Legal Alert, which can be accessed here. In D.R. Horton, Inc. v. NLRB, the United States Court of Appeals for the Fifth Circuit reviewed the NLRB's decision, and on December 3, 2013, it rejected the NLRB's position that a class- and collective-action waiver in an employment-related arbitration agreement violates the NLRA. The Fifth Circuit reasoned that the NLRB's ruling conflicted with the policy behind the Federal Arbitration Act, a federal law that favors the enforcement of arbitration agreements.  The court found nothing in the language, legislative history, or purpose of the NLRA that justified undermining the Federal Arbitration Act.  The Fifth Circuit did, however, uphold that portion of the NLRB's D.R. Horton decision holding that the arbitration agreement at issue unlawfully created the impression that employees were barred from filing an unfair labor practice charge with the NLRB.

The Fifth Circuit's decision in D.R. Horton v. NLRB is an important step forward in challenging the NLRB's position that class- and collective-action waivers in arbitration agreements violate the NLRA, but it does not mean that such waivers are now universally valid under that law.  As it has done in the past, the NLRB is likely to take the position that the Fifth Circuit's ruling is valid only in the states encompassed within the Fifth Circuit – Texas, Louisiana, and Mississippi.  The NLRB will probably continue to follow its original D.R. Horton ruling in all other parts of the country. Thus, in most areas of the United States, employers with employment-related arbitration agreements containing class- and collective-action waivers will still be vulnerable to unfair labor practice charges based on the mere existence of such arbitration agreements.  Employers using arbitration agreements should consult with legal counsel about the risks associated with class- and collective-action waivers and should also review their arbitration agreements to ensure that the agreements cannot reasonably be construed as barring employees from filing unfair labor practice charges with the NLRB.

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