In Rebuff to Labor Board, Fifth Circuit Sustains Arbitration Agreements with Class Action Waivers

by Williams Mullen
Contact

In recent years, employers have faced increased, and increasingly expensive, class action litigation from current and former employees. In response, many employers have turned to arbitration agreements with class-action waivers as a preemptive defense to such lawsuits.

As most readers will recall, however, in 2012 the National Labor Relations Board issued a holding attacking such agreements. In the case of D.R. Horton, the Board held that a national homebuilder’s arbitration agreement prohibiting class or collective arbitrations violated the National Labor Relations Act because it violated the rights of employees under Section 7 to engage in “protected or concerted activity.” This holding seemed to many to contradict twenty years of Supreme Court rulings repeatedly upholding arbitration agreements in the employment context. Accordingly, upon the issuance of the Board’s decision, the business community grew concerned at what it perceived to be an overreach by the National Labor Relations Board, and an attempt to insert itself into the non-unionized workplace where the majority of the employment arbitration agreements exist. 

On December 3, 2013, the Fifth Circuit overturned the Board. It held 2 to 1 that the National Labor Relations Board erred in finding that such agreements and their prohibitions against class or collective proceedings, whether as arbitration or judicial proceedings, violated the National Labor Relations Act. In a detailed analysis, the Fifth Circuit reviewed the goals and history of the National Labor Relations Act and the Federal Arbitration Act (a statute generally approving and permitting arbitration agreements). Rebuffing the Board’s argument that the National Labor Relations Act preempted the Federal Arbitration Act, the Fifth Circuit held that the two statutes are of equal importance. The Fifth Circuit found there was no legislative history to support the NLRB’s view that the National Labor Relations Act contained a congressional command to override the Federal Arbitration Act.

The Court went on to hold that the right to participate in collective and class action lawsuits was not substantive but procedural, and that the National Labor Relations Act’s “concerted activity” language protected only substantive rights. 

As a result, the arbitration agreement that D.R. Horton had between its employees and the company did not violate Section 7 of the National Labor Relations Act, even though it contained a prohibition against class and collective action arbitrations. In so holding, the Fifth Circuit joined the Second, Eighth and Ninth Circuits which earlier this year had found arbitration agreements containing class waivers to be enforceable. No circuit court has held otherwise.

The Fifth Circuit however did side with the National Labor Relations Board in determining that the provisions of D.R. Horton’s arbitration agreement that forbid employees from filing unfair labor practice charges with the NLRB violated Section 8(a)(1) of the National Labor Relations Act. According to the decision, D.R. Horton must revise its arbitration agreement to make it clear that employees retain a right to file charges with the National Labor Relations Board. Such a finding potentially opens the door for the National Labor Relations Board to pursue collective or class actions on behalf of employees, even where those employees signed arbitration waivers that would otherwise prohibit them from pursuing such coordinated claims. One suspects that the next battleground with the National Labor Relations Board will be this very issue. Employers of course will argue that, if arbitration agreements are in play, just as in the case of collective bargaining agreement arbitration procedures, that the National Labor Relations Board should defer its prosecution of any unfair labor practice claims to the arbitration procedure.

As the law evolves in this area, employers will need to continue to review their policies.  Arbitration agreements containing class waivers may be appropriate for those employers that wish to avoid the threat of class and/or collective actions. However, as the decision in D.R. Horton underscores, the enforceability of waivers may turn on the particular wording of those agreements and whether they contain the appropriate carve-outs. Employers need to be careful to craft arbitration agreements that are not discriminatory and do not mislead employees as to which rights they are waiving. In addition, employees should receive a complete copy of the agreement into which they are entering and should be fully informed as to those rights that they are giving up by entering into such agreements.

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.

© Williams Mullen | Attorney Advertising

Written by:

Williams Mullen
Contact
more
less

Williams Mullen 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):
hide

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.

Security

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.