As we previously reported, the U.S. Supreme Court in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) upheld a class action waiver included in a consumer contract that required customers to individually arbitrate their claims. We reasoned that employers could use similar class action waivers in employee arbitration agreements in order to avoid class/collective action claims. But, a recent decision by the National Labor Relations Board concludes that such an agreement violates federal labor law.
Specifically, the NLRB held that an employer violated the National Labor Relations Act by requiring its employees (as a condition of employment) to sign an arbitration agreement, which precluded them from filing joint, class, or collective claims against the company in any forum (arbitration or the courts). D.R. Horton, Inc., 357 NLRB No. 184 (2012).
The arbitration agreement provided (1) that the employee waived his/her right to file an employment-related lawsuit or civil proceeding against the company; (2) that arbitration would be the exclusive mechanism to resolve any disputes/claims relating to the employee’s employment; and (3) that the arbitrator would only be empowered to hear individual claims, and would not have the authority to decide class or collective cases.
The Board held that the employer violated Section 8(a)(1) of the National Labor Relations Act by requiring its employees to sign the arbitration agreement on the theory that it “unlawfully restricts employees’ Section 7 right to engage in concerted action for mutual aid or protection.” In the Board’s view, an individual who pursues a class or collective action regarding hours or pay (or other working conditions) seeks to initiate or induce group action, and is therefore engaged in concerted activity that is protected by Section 7. According to the Board, it was unlawful for the employer to require that the employees simultaneously waive their right to pursue employment litigation (including collective actions) through the courts, and their ability to pursue collective actions through arbitration.
Bottom Line
This is another example of the Board taking a broad view of what constitutes protected activity under the National Labor Relations Act. The Board’s decision is controversial, and it will almost certainly be appealed.