NLRA vs Federal Arbitration Act: Arbitration Wins

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In D.R. Horton, Inc., v. NLRB, No. 12-60031 (5th Cir. 2013), the Fifth Circuit overturned an NLRB decision that an employer infringed on employees’ rights by requiring them to sign an arbitration agreement in which they waived their right to maintain joint, class, or collective employment-related actions in any forum, judicial or arbitral. The court stated that though it defers to the Board’s interpretation of labor statutes, it does not owe the same deference to the Board’s interpretation of the Federal Arbitration Act (FAA). The Board’s decision requiring the availability of class actions effectively guts the purpose of arbitration, i.e. streamlined proceedings, and therefore contravenes the FAA. The court did, however, agree with the NLRB order that the employer revise the agreement’s language to clarify that, despite the employees’ waiver of collective action, they are not prohibited from filing unfair labor practice charges with the Board.

It appears the Fifth Circuit has gotten the Supreme Court’s message that federal policy favors arbitration. Though the Board might maintain that the NLRA is different—perhaps more important?—than other federal statutes, the Fifth Circuit has soundly rejected that notion.

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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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