NLRB Continues to Hold Firm on D.R. Horton Reasoning Despite Contrary Decisions in the Courts

Orrick - Employment Law and Litigation

Despite increasing rejection of the NLRB’s controversial D.R. Horton decision by almost all federal courts which have considered it, an NLRB administrative law judge recently felt there was no choice but to follow Board precedent and so applied and affirmed its holding. These cases illustrate the growing divide between the NLRB and courts over the D.R. Horton decision and the growing trend of federal courts refusing to uphold its enforcement.

Last year, D.R. Horton held that class action waivers are prohibited by the National Labor Relations Act because they interfere with an employee’s right to engage in collective activity. In affirming the D.R. Horton decision, on August 29, 2013, an NLRB judge decided that GameStop Corp.’s arbitration program barring class or collective litigation for employment-related claims was unlawful. The NLRB judge decided this even though the California employees were allowed to opt out of the program (in particular because information about the ability to opt-out was hidden in the program’s rules). The decision noted that D.R. Horton remains controlling board law and therefore required a decision that GameStop’s arbitration program was in violation of the National Labor Relations Act. Although GameStop tried citing to various U.S. Supreme Court cases since the D.R. Horton ruling to show that it was wrongly decided, the NLRB judge felt he was bound by the board’s ruling in D.R. Horton until the board or the Supreme Court actually does something to change the precedent.

Meanwhile, a new ruling on August 21, 2013, from the Ninth Circuit in Richards v. Ernst & Young LLP, confirms the enforceability of class action waivers in the courts despite D.R. Horton. The Ninth Circuit held that Ernst & Young’s arbitration agreement, which included a class waiver, was enforceable in a wage and hour lawsuit. In so deciding, the court vacated the lower court’s order certifying a class action because it should have compelled arbitration and the arbitration agreement between Ernst & Young and the named plaintiff precluded class arbitration.

Furthermore, the Second Circuit also recently declined to follow D.R. Horton earlier in August this year. The Second Circuit upheld an arbitration agreement with a class action waiver in the FLSA case of Sutherland v. Ernst & Young LLP. Together with the Eighth Circuit in January, the Second and Ninth Circuits have now become the second and third federal Circuit Courts to reject the NLRB’s D.R. Horton decision.


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.

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Orrick - Employment Law and Litigation

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