Recently, the issue of class/collective action waivers in
mandatory arbitration agreements has been a hot one. Including in
its seminal D.R. Horton decision, the National Labor
Relations Board (NLRB) has repeatedly taken the position that such
waivers violate employees' rights under Section 7 of the
National Labor Relations Act (NLRA). The Board has asserted that
requiring employees to waive their ability to bring a class or
collective action against their employer effectively (and
impermissibly) circumvents employees' right under the NLRA to
engage in certain concerted activity. The federal
courts—including now the Fifth Circuit—which have
examined this issue have disagreed and held that employees may, by
entering into mandatory arbitration agreements containing such
clauses, waive the ability to bring a class or collective
action.
In D.R. Horton, the Fifth Circuit has now squarely rejected the
NLRB's administrative decision in D.R. Horton that
class action waivers violate the NLRA, holding that the right of an
employee to bring class or collective action is procedural, rather
than substantive, and that the exception to enforcing the
arbitration agreement set forth in the Federal Arbitration
Act's (FAA) "saving clause" is inapplicable. Further,
the Fifth Circuit determined that there is no "congressional
command" contained in the NLRA or its legislative history that
mandates overriding the FAA's requirement that arbitration
agreements be enforced. In finding the arbitration agreement's
class action waiver enforceable, the Fifth Circuit in D.R.
Horton joins several other circuits. See Richards v. Ernst
& Young, LLP, No. 11-17530, 2013 U.S. App. LEXIS 17488
(9th Cir. Aug. 21, 2013); Sutherland v. Ernst & Young
LLP, 726 F.3d 290 (9th Cir. 2013); Owen v. Bristol Care,
Inc., 702 F.3d 1050 (8th Cir. 2013).
In a matter of lesser significance, however, the court sided with
the Board, holding that the arbitration agreement's language
that he or she "knowingly waiv[es] the right to file a lawsuit
or other civil proceeding..." could be misconstrued
by employees as waiving their administrative rights under the NLRA
to bring an unfair labor practice charge. Accordingly, the court
found reasonable the Board's order that D.R. Horton modify the
waiver language.
What are the implications of this decision for employers? First
and foremost, with the express rejection of the Board's seminal
decision on this topic, employers can be more, but still not
completely, confident that class or collective action waivers in
arbitration agreements will be found permissible by federal courts.
It is likely that the NLRB's position will eventually make its
way to the U.S. Supreme Court. Second, employers should review the
language in their mandatory arbitration agreements to ensure that
the agreements clearly convey that a class or collective action
waiver does not preclude employees from filing a charge with the
NLRB. Indeed, including in arbitration agreements a statement to
this effect is advisable.
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