Employers are now on notice from the NLRB that requiring employees covered under the National Labor Relations Act to waive class actions regarding wages, hours or working conditions is likely to be a violation of the Act. In D. R. Horton, Inc. and Michael Cuda, Case 12–CA–25764 (357 NLRB No. 184, January 3, 2012) the NLRB held that it is a violation of federal labor law to require employees to sign arbitration agreements that prevent them from joining together in class or collective actions to pursue employment-related legal claims in arbitration or in court. Employers who thought they could rely upon AT&T Mobility v. Concepcion, 131 S.Ct. 1740, 1746, 2011 U.S. LEXIS 3367 (2011) to require agreements restricting class actions will have to think again when employees are subject to the NLRA.
The Respondent in Horton, a national home builder, required all current and new employees to sign a mutual arbitration agreement as a term of employment restricting employment related claims to individual arbitration and waiving the right to a judicial forum. Additionally, the arbitration agreement restricted the arbitrator from consolidating an employee’s claim with claims of other employees. The NLRB found that such an agreement unlawfully restricts employees’ from engaging in concerted action for mutual aid or protection, which are substantive rights protected under Section 7 of the Act.
You will recall that in AT&T Mobility, the Supreme Court held that the Federal Arbitration Act preempted a California state rule that regarded as unconscionable a consumer arbitration agreement restricting class arbitration. The NLRB in Horton, which was a case of first impression for the Board, nevertheless found that its decision did not conflict with the Federal Arbitration Act or undermine the pro-arbitration policy underlying the FAA. The Board distinguished between an agreement imposed on an employee subject to the NLRA and a consumer agreement such as the one in AT&T Mobility which was between a cellular customer and a cell phone provider. To bolster its position, the Board stated that the mutual arbitration agreement in Horton would equally have violated the NLRA if it said nothing about arbitration, but merely required employees, as a condition of employment, to agree to pursue any claims in court against the Respondent solely on an individual basis. Further distinction made by the Board was that AT&T Mobility involved a conflict between federal and state law, while Horton involved a conflict between two federal laws. Should there be an appeal, which is likely, it will be interesting to see how the U.S. Court of Appeals will view the NLRB’s position of the NLRA relative to the FAA.