Arbitration Agreement Barring Class Litigation Violates the NLRA

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On January 6, the National Labor Relations Board (Board or NLRB) issued a long-awaited decision in D.R. Horton, Inc., 357 N.L.R.B. No. 184, dealing with whether a nonunion employer’s mandatory arbitration agreement — requiring arbitration of all claims on an “individual” basis and precluding any “class” and “collective action” proceeding—violated the National Labor Relations Act (NLRA). A plurality consisting of Board Chairman Mark Pearce and Member Craig Becker ruled that home builder D.R. Horton’s mutual arbitration agreement (MAA) violated the NLRA because it required employees — as a condition of employment — to forgo class and collective action court and arbitration proceedings.

The D.R. Horton ruling was dated January 3, 2012, the last day of Member Becker’s recess appointment and the day before President Obama announced three new recess appointments to the NLRB. Board Member Brian Hayes was recused and did not participate in deciding the merits of the case.

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