Employers cannot require employees to surrender their right to pursue employment class actions, the National Labor Relations Board ("NLRB") recently ruled in a two-member decision. The decision follows closely on the heels of the U.S. Supreme Court's ruling protecting class action waivers. In AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), the Supreme Court held that the Federal Arbitration Act preempts a California law invalidating AT&T's class action waivers in cellphone contracts.

That Supreme Court decision does not extend to employment arbitration agreements according to NLRB Member Mark Gaston Pearce and now-former Member Craig Becker. Their conclusion, reached in D.R. Horton Inc. and Michael Cuda, Case 12-CA-25764, provides that complete class action waivers prevent employees from exercising their right "to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection" under Section 7 of the National Labor Relations Act ("NLRA").

As the final administrative arbiter on all things labor-related, the NLRB reasoned that class action waivers interfere with employee rights to act collectively. "[Arbitration agreements that] require[] employees, as a condition of employment, to refrain from brining collective or class claims in any forum . . . clearly and expressly bars employees from exercising substantive rights that have long been held to be protected by Section 7 of the NLRA."

This decision is not to say that employers may not limit arbitration to individual claims. As the NLRB explained, "[s]o long as the employer leaves open a judicial forum for class and collective claims . . . [e]mployers remain free to insist that arbitral proceedings be conducted on an individual basis."

The NLRB seemingly decided the case with just two members, instead of the traditional three-member quorum, because the lone Republican Member, Brian Hayes, apparently recused himself from the decision. The basis for Member Hayes' recusal remains unclear. But two-member decisions were invalidated by the Supreme Court in New Process Steel v. NLRB, 130 S. Ct. 2635 (2010). The question remains whether the Board also may act when one of three quorum members has been recused and is not replaced for reaching a decision. The D.R. Horton decision will likely face challenge through appeal to a Circuit Court of Appeals, and possibly the Supreme Court.

Pending legal challenge to the D.R. Horton decision, employers should possibly review and revise their arbitration agreements as needed.

For More Information

For questions pertaining to the information presented above, please contact Terry Kilroy at 816.374.0533 or tkilroy@polsinelli.com.