D.R. Horton Decision on Class Action Waivers in Mandatory Arbitration Agreements Draws Decidedly Negative Reaction from Federal Courts

by Franczek Radelet P.C.

[authors: Amy Zdravecky and Josh Meeuwse]

In January, we reported on the National Labor Relations Board’s (NLRB) controversial decision in D.R. Horton, Inc. and the broad implications that it had for both union and non-unionized workforces. The NLRB’s decision in D.R. Horton is pending before the U.S. Court of Appeals for the Fifth Circuit. Meanwhile, a majority of federal district courts who have addressed the issue have disagreed with the NLRB and have refused to follow its holding, creating a “perfect storm” which could lead to a Circuit Court split (and perhaps a Supreme Court decision) or a reversal of the NLRB’s holding.

In D.R. Horton, the Board held that a mandatory arbitration agreement that waives employees’ rights to participate in class or collective actions is unlawful under the National Labor Relations Act (NLRA). The NLRB reasoned that the broad language in Section 7 of the NLRA, which gives employees the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection,” includes the right to file a class or collective action over wages, hours, or working conditions, whether in court or before an arbitrator. Because the mandatory arbitration agreement in D.R. Horton barred employees from doing so, (and thus in the NLRB’s opinion, prevented them from exercising their Section 7 rights), the NLRB held that the agreement violated the NLRA. The NLRB also held that there was no conflict between its decision and the Federal Arbitration Act (FAA), despite the fact that FAA manifests a “liberal federal policy favoring arbitration agreements.”

A majority of federal district courts disagree with the NLRB’s D.R. Horton decision. Over the past nine months, district courts in Arkansas, California, Florida, Kansas, Pennsylvania (Eastern and Middle Districts), and New York have expressly declined to follow D.R. Horton in similar cases involving arbitration agreements and class action waivers. The district courts have repeatedly observed that the NLRB’s ruling conflicts with U.S. Supreme Court precedent, and that the Court’s recent decision in AT&T Mobility v. Concepcion held that collective arbitration is contrary to the purposes of the FAA, and thus, the FAA requires not only compelling arbitration, but compelling arbitration on an individual basis.

Several courts have taken the NLRB to task for its flawed analysis. For example, last month Judge D. P. Marshall, Jr., an Arkansas district court judge recently appointed by President Obama, determined that the NLRB “stumbled on the statutory history” by incorrectly concluding that the FAA “had to give way” to the NLRA. In fact, as Judge Marshall observed, although the FAA was first enacted in 1925, Congress reenacted it in 1947 after passing the NLRA and its companion, the Norris-LaGuardia Act. Thus, under principles of statutory interpretation, if there is a conflict between the statutes, the NLRA should “give way” to the FAA and the federal policy in favor of arbitration. Delock v. Securitas Security Services USA, Inc., No. 4:11-cv-520-DPM, 2012 WL 3150391 (E.D. Ark. Aug. 1, 2012).

Not all of the district courts, however, disagree with the NLRB. Two district courts, one in Missouri and one in Wisconsin, applied D.R. Horton to strike down class action waivers in arbitration agreements because they violated the NLRA, and in doing so, they distinguished the Supreme Court’s ruling in Concepcion as not controlling.

Given the disagreement between the courts, the substantial number of cases addressing the issue, and the pending Fifth Circuit appeal, there is a significant likelihood that one of the Circuit Courts of Appeal will issue a decision rejecting the NLRB’s holding in D.R. Horton. Alternatively, there may be a split between Circuit Courts which may lead to Supreme Court review. In the meantime, although the NLRB (and the NLRB’s Administrative Law Judges and Regional Directors) continue to apply the holding in D.R. Horton, based on the recent court decisions, employers face a better chance of successfully enforcing arbitration agreements that waive collective action claims when litigating in federal district court.


Written by:

Franczek Radelet P.C.

Franczek Radelet P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.