From the August 2012 issue of the PLUS Journal – authors Jonathan Krol and Andrew Dorman look at the impact of the NLRB’s ruling on D.R. Horton.

In D.R. Horton, Inc., 357 NLRB No. 184, a much anticipated decision released on January 3, 2012, the National Labor Relations Board (“NLRB”) announced that mandatory class action waivers contained in employment applications are an unlawful restriction on employees’ rights to “engage in…concerted activities for the purpose of collective bargaining or other mutual aid or protection,” pursuant to Section 7 of the National Labor Relations Act (“NLRA”).

D.R. Horton found that an employer engages in unfair labor practices by requiring employees to waive their ability to bring class or collective actions despite recent Supreme Court precedent upholding the enforceability of such clauses in non-employment contexts.  Just last year, the Supreme Court released its landmark decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), enforcing said waivers in consumer arbitration agreements.  Concepcion found that state law prohibiting class action waivers in consumer contracts created a scheme inconsistent with, and thus preempted by, the Federal Arbitration Act (“FAA”).  As such, the interpretation and enforceability of said waivers remains simply a matter of contract law.  Concepcion was decided on the heels of Stolt-Nielsen S. A. v. Animal Feeds Int’l Corp., 130 S. Ct. 1758 (2010),another case involving interpretation of arbitration clauses.  In that case, the Supreme Court held that an agreement silent on the question of class arbitration could not be interpreted to allow it because of the fundamental changes required by a shift from bilateral arbitration to class-action arbitration.

In distinguishing the aforementioned Supreme Court precedent, D.R. Horton noted that neither case involved employment agreements or the waiver of rights protected by federal law.  In addition, the policy espoused by the FAA did not alter the NLRB’s findings because, despite the FAA’s strong policy in favor of arbitration, the Supreme Court has held that the FAA’s protection of the right to arbitration cannot require a party to forego substantive rights protected by statute.  The NLRB found the mandates of Section 7 protecting concerted activity were substantive rights and, as a result, the FAA did not alter its ruling.


PLUS members can read the full text of this article, and many others, in the PLUS Journal archive.