Fifth Circuit Will Not Review Decision Rejecting NLRB Position on Class Action Arbitration Waivers


As previously reported in EmployNews, federal courts across the U.S. continue to hear cases challenging the inclusion of class and collective action waivers in mandatory arbitration agreements between employers and employees. The waivers would prevent employees from pursuing arbitration as a class, requiring that any claims relating to their employment be heard individually. This creates a substantial advantage for employers as compared to having to defend claims involving large numbers of employees in court or through arbitration.

Early challenges to class action waivers focused on the alleged unfairness of the provisions. Each individual employee’s claim may be too small to economically litigate, making class action relief the only practical way to pursue the action. Federal courts rejected these theories, noting strong Supreme Court precedence upholding the use of individual arbitration agreements.

Faced with these losses, plaintiffs tried a different approach. In its D.R. Horton decision, the National Labor Relations Board concluded that regardless of federal preference for arbitration, mandatory class action waivers violate Section 8(a)(1) of the NLRA because they prevent employees from collectively seeking relief. The employer appealed this decision to the Fifth Circuit Court of Appeals, which in a 2-1 decision upheld use of the class action waivers. The NLRB in turn sought review of this decision by the full Fifth Circuit.

Last week, the Fifth Circuit rejected the NLRB’s petition, refusing to reconsider the panel decision. As a result, the NLRB gave an early indication of its intent to appeal the decision to the U.S. Supreme Court. While the Supreme Court may not accept review, its recent string of decisions involving arbitration agreements indicates that it may view this issue as one meriting high court consideration. If not, employers have the Fifth Circuit precedent to use as other federal courts weigh in on this issue.

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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