NLRB Bars Class Action Waivers in Labor and Employment Cases

After being part of the panel at the AALS meeting that declared class arbitration dead, Jean Sternlight from UNLV contributes a guest post about the NLRB’s declaration that “they’re not dead yet.”  In all seriousness, the discussion on the future of arbitration was fantastic.  Thanks to Jean and all of the other presenters, and congratulations to Jen Reynolds for her election as AALS ADR Section Chair-Elect.

__________________________________________________________________

Just as we were ready to declare virtually all class actions dead, thanks to AT&T Mobility v. Concepcion, the National Labor Relations Board has issued a decision, D.R. Horton, Inc. and Michael Cuda, holding that employers may not deprive either unionized or non-unionized employees of the opportunity to bring class actions against their employer.  Ruling that both the National Labor Relations Act (“NLRA”) and the Norris-LaGuardia Act of 1932 protect employees’ ability to participate in class actions as a form of “concerted activity,” the Board enjoined employer D.R. Horton from using its mandatory arbitration clause to require employees to bring claims individually.  The Board explained that just as the substantive right to engage in concerted activity allows unionized and non-unionized employees to join together in strikes or mutual aid societies, so it also allows them to bring litigation or arbitration claims jointly, whether as a collective or in a class action.   The NLRB’s decision was supported by the EEOC and the Department of Labor in amicus briefs.

                The employer and its amici opposed the decision on the grounds, inter alia, that voiding the arbitral class action waiver would be inconsistent with the Federal Arbitration Act and recent Supreme Court arbitration decisions including Concepcion, Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp, and Gilmer v. Interstate/Johnson Lane Corp.  In rejecting these arguments the Board emphasized the following:

(1) by voiding the arbitral class action waiver the NLRA does not single out arbitration because a contract prohibiting class action waivers in litigation would be equally invalid;

(2) the arbitration provision at issue here, unlike those addressed in Gilmer or other cases, would deprive claimants of a substantive right, specifically the right to engage in concerted activity, and the Court e.g., in  Mitsubishi  has made clear that arbitration clauses cannot deprive persons of their substantive rights;

(3) while the employer asserted the arbitration clause at issue was an “agreement” in reality it was imposed upon all employees as a condition of hire;

(4) unlike the clause at issue in Concepcion, the Board’s decision  would not force employers into an arbitral class action, because employers could instead require employees to arbitrate individual claims while allowing them to litigate collective or class claims;

(5)  while the Board’s ruling may arguably be in tension with the Supreme Court’s desire to keep arbitration simple, most employment class actions would be smaller than many consumer class actions, and thus more workable;

(6) while a Union may agree to waive employees’ right to bring an action in court (Pyett), an employer’s imposition of a mandatory  arbitral class action waiver on unrepresented employees is not comparable to a waiver freely bargained by a Union;

(7) there is no direct conflict between the NLRA and the FAA, because it is possible to reconcile the two statutes to prohibit arbitral class action waivers only with respect to employment;

(8) even if there were a direct conflict between the NLRA and the FAA the FAA would have to yield to the Norris-LaGuardia Act, passed seven years after the FAA.

                The D.R. Horton decision is sure to be appealed to either the Eleventh Circuit or the D.C. Circuit, and it may well end up in front of the Supreme Court.  Employers and their amici such as the Chamber of Commerce will undoubtedly fight hard to have the decision reversed.  Their anger about the decision may well be heightened by the fact that it was signed by only two members of the Board, and by the fact that issuance of the decision coincides with President Obama’s recess appointment of three additional members to the Board. 

                So long as the D.R. Horton decisions survives it will, however, have a substantial impact.  Employers will at least temporarily be stymied in their attempt to evade class actions brought with respect to claims under the Fair Labor Standards Act, Title VII, or other employment laws.   While the  decision does not directly help consumers or others who may still be subjected to arbitral class action waivers, indirectly perhaps D.R. Horton will provide courts with encouragement that they can void those arbitral class action waivers that prevent people from vindicating their rights under federal law.   Perhaps it will even encourage courts to limit Concepcion to its facts.  Although, as I have discussed, to date, most courts are interpreting Concepcion very broadly, as a “get out of class actions free” card, the NLRB has highlighted the importance of class actions and provided an example of how Concepcion might be distinguished

3 thoughts on “NLRB Bars Class Action Waivers in Labor and Employment Cases”

Comments are closed.