NLRB Strikes Down Class Action Waivers in Employment Arbitration Agreements

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In a recent decision with far-reaching significance for both unionized and non-unionized employers that use mandatory arbitration agreements with their employees, the National Labor Relations Board (NLRB) held that employment arbitration agreements containing class action waivers violate federal labor law. Specifically, in D.R. Horton, Inc., 357 N.L.R.B. No. 184, the board found that an agreement imposed as a condition of employment requiring arbitration but precluding employees from filing joint, class, or collective claims addressing their wages, hours, or other working conditions violates Section 8(a)(1) of the National Labor Relations Act (NLRA). This decision has the potential to invalidate all such provisions contained in employment agreements, notwithstanding the Supreme Court's recent AT&T Mobility v. Concepcion decision specifically endorsing class action waivers in arbitration agreements.

Background

The 2-0 decision focused on an arbitration agreement used by the national home builder D.R. Horton.1 Under D.R. Horton's standard employment agreement, both the employees and the company waived their rights to have any claims heard by a judge or jury and instead agreed to bring all claims to an arbitrator. In addition, the agreement provided that the arbitrator could only hear claims on an individual basis, thereby waiving the employees' rights to bring class or collective action on behalf of similarly situated employees in court or in arbitration.

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