Appellate Court Reverses NLRB and Upholds Legality of Class Action Waivers

Eric Paltell
Eric Paltell

Employers scored a big victory yesterday when the United States Court of Appeals for the Fifth Circuit reversed the National Labor Relations Board’s D.R Horton ruling, which invalidated an employer’s arbitration agreement containing a waiver of an employee’s right to file class-action claims. D.R. Horton v. NLRB, 5th Cir No. 12-60031 (12/3/13).  The decision will make it  easier for employers to enforce class-action waivers, including waivers of the right to bring collective actions under the Fair Labor Standards Act.

In a 2- 1 decision, the Fifth Circuit concluded that the NLRB had not given proper weight to the Federal Arbitration Act (“FAA”), which provides that arbitration agreements are valid and enforceable, barring certain exceptions. The appellate court did agree with the NLRB that certain language in the arbitration agreement could be construed as limiting the rights of employees to file  unfair labor practice charges, and upheld the portion of the NLRB ruling requiring Horton to revise the policy.

The NLRB has not yet decided if it will appeal the decision to the Supreme Court. However, under the NLRB doctrine of “non–acquiescence,” the Board is not required to follow decisions of appellate courts other then the Supreme Court. Therefore, the NLRB could continue to invalidate arbitration agreements precluding class and collective claims, even though it’s rulings might not be upheld when challenged on appeal.

The Fifth Circuit’s holding follows the Supreme Court’s June 2013 decision in American Express Co. v. Italian Colors Restaurant, which held that  the FAA prohibits courts from invalidating arbitration agreements that contain class-action waivers, absent an express congressional statement that class-action proceedings are so indispensable to a federal claim as to override the FAA.  Together, these decisions may give employers a very powerful tool to contain the proliferation of class and collective claims that we have seen in recent years.

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