Monday, January 9, 2012

NLRB trumps U.S. Supreme Court on class action arbitrations

Last year, the U.S. Supreme Court, in AT&T Mobility v. Concepcion, held that a business could compel a group of individuals to waive their right to file a class action lawsuit and instead arbitrate their collective dispute. Employers rejoiced, believing that they finally had the weapon they needed to battle the scourge of wage and hour class actions. Last Friday, however, the NLRB struck a blow against this apparent victory.

In D. R. Horton, Inc. [pdf], the NLRB held that an arbitration agreement violated the National Labor Relations Act’s protections for employee concerted activity. The facts are pretty straight-forward. The employer required all of its employees, as a condition of their employment, to sign a master arbitration agreement, under which they agreed:

  • to submit all disputes and claims relating to their employment to final and binding arbitration;
  • that the arbitrator “may hear only … individual claims,” “will not have the authority to consolidate the claims of other employees,” and “does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding”; and
  • to waive “the right to file a lawsuit or other civil proceeding relating to … employment with the Company” and “the right to resolve employment-related disputes in a proceeding before a judge or jury.”

The NLRB concluded that the agreement “unlawfully restricts employees’ Section 7 right to engage in concerted action for mutual aid or protection,” and held that the employer “violated Section 8(a)(1) by requiring employees to waive their right to collectively pursue employment-related claims in all forums, arbitral and judicial.”

A few key points to make about this case:

  1. This case continues the trend (as we’ve seen in the social media cases—more on this tomorrow) of the NLRB pursuing protected, concerted activity cases in non-union workplaces.
  2. The NLRB did not concluded that all class action arbitration agreements are invalid, but merely those that leave employees without a collective remedy. An arbitration agreement, for example, that permits for a judicial filing would still be lawful. (But, then again, wouldn’t that fall-back nullify any benefit to be gained from the arbitration agreement in the first place?)
  3. This decision likely is not the last we will hear on this issue. This case is almost certainly headed to the 11th Circuit Court of Appeals. Depending on that result, it will be curious to see if the Supreme Court picks up the ball to reconcile this case with AT&T Mobility. Until then, employers should tread carefully in trying to implement or enforce class action arbitration agreements.