The Fifth Circuit’s Rejection of the NLRB’s Ban on Class Waivers - a Victory for Employers

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Earlier this week, the Fifth Circuit Court of Appeals ruled in D.R. Horton, Inc. v. National Labor Relations Board, that arbitration agreements which bar employees from pursuing class actions do not violate federal labor law. In so doing, the court rejected the National Labor Relations Board’s (NLRB) prior decision in D.R. Horton, Inc. banning such class waivers.

The NLRB's decision arose from an unfair labor practice charge which was filed by Michael Cuda against his employer, homebuilder D.R. Horton, Inc. Cuda had attempted to launch a class action accusing D.R. Horton of misclassifying himself and other superintendents as exempt from the Fair Labor Standards Act's (FLSA) overtime requirements. D.R. Horton required that all of its employees sign a mandatory arbitration agreement. When Cuda tried to initiate class-wide arbitration regarding his FLSA claim, D.R. Horton objected, pointing to a provision in its arbitration agreement that barred the arbitration of collective or class claims. The agreement expressly provided that employment-related disputes were to be resolved only through individual arbitration. Cuda responded by filing a charge with the NLRB, claiming that the agreement’s bar of collective or class claims violated the National Labor Relations Act (NLRA).

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