Act Now Advisory: Class Action Arbitration Bans - the Obama NLRB Attempts to Trump the Federal Arbitration Act and the Supreme Court .


Two recent decisions on arbitration, one from the National Labor Relations Board
(“NLRB” or “Board”) and one from the Supreme Court of the United States, present an
interesting question: Can employers limit employees from launching potentially costly
class actions? Some employers have applicants or new employees sign a separate
agreement, or include a clause in application forms or in the employee handbook (which
employees acknowledge), requiring employees to bring future disputes to arbitration
and to agree that the arbitration will be individual only – not a class or collective action.
These companies apparently hope that arbitration, and the avoidance of a jury trial, will
be less costly than defending a court action if a dispute arises. They also hope to
eliminate the attraction and risk of class and collective actions, which often are seen as
providing undue leverage and a larger total payday to claimants and their attorneys.
In a decision issued on January 3, 2012, in D.R. Horton, Inc. and Michael Cuda (Case
12-CA-25764), a two-member panel of the NLRB took the novel position that an
employer violates the National Labor Relations Act (“NLRA”) when it requires
employees covered by the NLRA (i.e., most non-supervisory and non-managerial
employees of most private sector employers, whether unionized or not) to agree, as a
condition of employment, to binding arbitration of any disputes or claims arising out of
their employment if the arbitrator is restricted to hearing only an individual claim, not a
class or collective action.

Then, in a decision dated January 10, 2012, in CompuCredit Corp. v. Greenwood (No.
10-948), 565 U.S. ___, 132 S. Ct. 665 (2012), the Supreme Court extended a line of
cases favoring the referral of disputes to arbitration and confirmed an organization’s
ability to require arbitration, even where a governing statute specifically describes
“actions” in “court.” The Court held that where a federal statute (in this case the Credit
Repair Organizations Act (“CROA”)) does not show a specific “contrary congressional
command” as to whether a claim can proceed in arbitration, the Federal Arbitration Act
(“FAA”) “requires the arbitration agreement to be enforced according to its terms.”
Thus, a clause in a credit card application to resolve any dispute arising from the
applicant’s account by binding arbitration was held to be enforceable.

Please see full advisory below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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