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New NLRB Decision May Curtail Class Arbitrations

Published by on January 12, 2012

In AT&T Mobility v. Concepcion, the U.S. Supreme Court enforced a consumer arbitration agreement that contained a “class action waiver” in which the plaintiff waived his right to file a class action lawsuit, and required the plaintiff to arbitrate his dispute on an individual basis.  In a recent decision, D.R. Horton, Inc., the National Labor Relations […]

In AT&T Mobility v. Concepcion, the U.S. Supreme Court enforced a consumer arbitration agreement that contained a “class action waiver” in which the plaintiff waived his right to file a class action lawsuit, and required the plaintiff to arbitrate his dispute on an individual basis.  In a recent decision, D.R. Horton, Inc., the National Labor Relations Board (“NLRB”) concluded that a similar arbitration agreement including a class action waiver unlawfully restricted employees’ right to engage in concerted activity, and therefore, violated the National Labor Relations Act (“NLRA”).  More after the break.

D.R. Horton, Inc. was a home builder that required each employee to sign a Mutual Arbitration Agreement which stated that: (a) all disputes and claims relating to the employee’s employment would be determined by final and binding arbitration; (b) the arbitrator could only hear individual claims and did not have the authority to fashion a proceeding as a class or collection action or to award relief to a group or class of employees in one arbitration proceeding; and (c) the employee waives the right to file a lawsuit or other civil proceeding relating to his or her employment.  The NLRB concluded that the arbitration agreement “unlawfully restricts employees’ Section 7 right to engage in concerted action for mutual aid or protection,” and D.R. Horton, Inc. “violated Section 8(a)(1) by requiring employees to waive their right to collectively pursue employment-related claims in all forums, arbitral and judicial.” 

As a matter of first impression, the NLRB further held that their decision under the NLRA does not conflict with the policy in favor of arbitration underlying the Federal Arbitration Act (“FAA”), which AT&T Mobility v. Concepcion concluded permitted such arbitration agreements.  The NLRB stated that its holding was limited to those agreements that barred protected, concerted activity.  Therefore, “an agreement requiring arbitration of any individual employment-related claims, but not precluding a judicial forum for class or collective claims would not violate the NLRB, because it would not bar concerted activity.”    

It is likely that this decision will be appealed to the 11th Circuit Court of Appeals, and perhaps ultimately, to the United States Supreme Court.  To read another blog post on how a California Court of Appeal has attempted to  chip away at the impact of the holding in AT&T Mobility v. Concepcion, click here

To read the full NLRB decision and order in D.R. Horton, Inc., click here

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