NLRB Rules that Class Action Waivers in Mandatory Arbitration Agreements Are Unlawful

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In a case involving issues of first impression, the National Labor Relations Board (NLRB) recently held that a mandatory arbitration agreement that waived employees’ rights to participate in class or collective actions was unlawful under the National Labor Relations Act (NLRA). D. R. Horton, Inc., Case 12-CA-25764 (1/3/12; released 1/6/12).

Facts

Beginning in 2006, the non-union Employer required all new and current employees to execute a Mutual Arbitration Agreement (MMA) as a condition of employment. The MMA provided, in relevant part, the following:

• All disputes and claims relating to an employee’s employment would be determined exclusively by final and binding arbitration;

• An arbitrator could hear only an individual employee’s claims, would not have the authority to consolidate the claims of other employees, and did not have authority to consider a proceeding as a class or collective action or to award relief to a group or class of employees; and

• The signatory employee waived the following rights: to file a lawsuit or other civil proceeding relating to his or her employment and to resolve employment-related disputes in a proceeding before a judge or jury.

In 2008, an attorney notified the Employer that it was pursuing arbitration of certain Fair Labor Standards Act (FLSA) claims on behalf of Michael Cuda, a former employee, and a nationwide class of similarly situated employees. The Employer objected, pointing to the MMA’s prohibition on arbitration of class actions. Cuda thereafter filed an unfair labor practice charge with the NLRB.

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