Arbitration Agreements Can Be Used to Avoid Class Claims Under Labor Laws

by Miller Canfield
Contact

Employers can avoid class claims by entering agreements that require individual arbitration, but they should review those agreements to ensure that they contain clear exceptions for employees’ right to pursue unfair labor practice charges with the National Labor Relations Board (NLRB or Board), the U.S. Court of Appeals for the Fifth Circuit ruled. 

In D.R. Horton, Inc. v. NLRB, the Fifth Circuit overturned a key Board ruling and held that the National Labor Relations Act (NLRA) doesn’t prevent an employer from including a waiver of all class claims in its arbitration agreements, due to the strong federal policies supporting individual arbitration in the Federal Arbitration Act (FAA).  But the existence of a well-worded arbitration agreement is important. Without it, a mere release or waiver of court-based class-action claims might not be upheld under labor laws, regardless of whether a workplace is unionized. 

Original Board Ruling

The Board panel originally issued an order against Horton, the nation’s largest home building company, concluding that Horton interfered with its supervisor’s right to engage in “concerted activity” to improve working conditions when his arbitration agreement expressly prohibited him from pursuing class actions or class arbitration of wage-and-hour claims. Horton’s other workers signed similar agreements. The Board argued that the agreements violated Sections 7 (concerted activity) and 8 (interference) of the NLRA, which apply to both unionized and non-unionized workplaces.

Horton defended on the grounds that the FAA protected these arbitration agreements, but the Board ruled that the NLRA essentially trumped the FAA for various technical reasons, including a determination that the waivers were illegal contract provisions under the NLRA and, therefore, fell into an exception to the FAA’s protections.

Federal Court Review

Although the SecondEighth and Ninth Circuit Courts had criticized and rejected the Board’s rationale, Horton's business is rooted in Texas, making that court's review of the Board's decision the definitive one, unless the U.S. Supreme Court were to agree to review it. The Fifth Circuit rejected the Board’s position, with one small exception: that the arbitration clause must be clear that it doesn’t prevent unfair labor charges under the NLRA.

The Fifth Circuit reasoned that although the Board’s interpretation of labor law was entitled to deference, Congress spoke with equal power and clarity in the FAA, which was beyond the Board’s special expertise. Under labor law, class litigation is a kind of concerted action, but outside the NLRA, class litigation is simply a procedure, not a right, and is no different than many federal statutory rights and claims that are subject to arbitration under the FAA.

Requiring that class arbitration must be available would make arbitration much less attractive to employers and would require additional formal procedures and protections that defeat the FAA’s central statutory purpose and scheme. Thus, the question was whether the NLRA completely trumps the FAA. According to the Fifth Circuit, it does not. Labor law endorses arbitration, and the Board – as the opponent of arbitration – failed to meet its burden to defeat the arbitration agreements.

The decision signals that employers can properly use arbitration agreements to provide for individual arbitration of disputes and to eliminate class claims, but employers should review those agreements to clarify that they don’t prevent employees from bringing unfair labor charges under the NLRA.

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.

© Miller Canfield | Attorney Advertising

Written by:

Miller Canfield
Contact
more
less

Miller Canfield on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!