NLRB Says Agreements to Waive Participation in Class Action Violate Federal Labor Law
Wow! That is all I could say after I read the recent NLRB decision holding that an employer's requirement that employee sign mandatory arbitration agreements waiving the right to litigate claims in a collective or class action violates the National Labor Relations Act.
In the case styled D.R. Horton, Inc. and Michael Cuda, the Board considered an arbitration program used nationwide by the home builder employer. The arbitration agreement, signed by all employees, required that all disputes be resolved through arbitration and that no disputes would be arbitrated on a class or collective basis in any forum, judicial or arbitral. When Michael Cuda sought to bring a nationwide wage and hour class action on behalf of all of the company's superintendents, the company sought to enforce the arbitration agreement and its mandate that claims be litigated individually --not collectively. Cuda filed an unfair practice charge claiming that the waiver of arbitrating or litigating claims on a representative, class or collective action basis violated the employees' Section 7 rights to engage in mutual aid or protection.
Since the U.S. Supreme Court decision in Concepcion, more employers have incorporated strategies to ensure that claims are litigated on a level playing field by requiring employees to arbitrate or litigate those claims on an individual (or non-class action) basis. Notwithstanding the Board's commentary to the contrary (i.e., the Board professed that the decision would impact few agreements), the Board's decision will have widespread ramifications on companies use of arbitration programs. Despite the disadvantages that arbitration carries, one advantage was the widespread belief that employers could better manage the prospect of having to litigate class actions with large numbers of their workforce through arbitration agreements designed to decide claims on an individual basis. The decision in D.R. Horton eliminates that potential advantage of arbitration. Moreover, the Board's decision is not limited to arbitration programs and its rationale may be applied outside of arbitration agreements such as agreements with individual employees
Finally, because it is a decision applying federal labor law, a law that applies to most employers and employees, the Board's position could have wide-reaching, adverse consequences for employers seeking to control the risk of defending against class or collective actions. This is an important decision that warrants following through the inevitable appeal that D.R. Horton will make.
You can download a full copy of the Board's decision here.
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