NLRB Takes a Hardline Approach Against Class Action Waivers in Employment Applications

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.

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About plushq

The Professional Liability Underwriting Society (PLUS) was founded in 1986 by industry professionals who recognized the need for a forum for individuals involved in the field of professional liability. The Society is a non-profit organization with membership open to persons interested in the promotion and development of the professional liability industry. Membership consists of over 6,500 individuals, representing over 1,000 companies active in the many fields of professional liability. PLUS currently receives the support of more than 200 companies through corporate membership. PLUS is recognized as the primary source of professional liability educational programs and seminars, assistance to its members to help serve clients, and information regarding professional liability. The Society is continually seeking new means to fulfill its mission statement and better serve its members.

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