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.
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