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


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).


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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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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