Class Action Waivers in Arbitration Agreements: One Step Forward, Two Steps Back!

If you thought all the news from the NLRB these days had to do with Posters and Recess appointments, think again. On January 6, 2012, the National Labor Relations Board emphatically rejected an arbitration agreement that required employees to waive their class action rights. This opinion squarely rejected the U.S. Supreme Court ruling last year in AT&T Mobility v. Concepcion, wherein SCOTUS approved of class action waivers in compulsory arbitration agreements.

This was all done on the very same day that three appointments to fill NLRB vacancies were made while the U.S. Senate was either “in recess” or “not in recess.” But, that is a story for another day.

On the last day of his term, Craig Becker (NLRB member) and Mark Gaston Pearce (NLRB Chairman) (both President Obama appointees) issued an opinion in the highly anticipated case of D.R. Horton, Inc. and Michael Cuda. In D.R. Horton, NLRB held that the holding in AT&T Mobility does not apply in the workplace, and that requiring them as a condition of employment is an unfair labor practice in violation of the NLRA. AT&T Mobility, the NLRB reasoned, was a case about consumer class actions, whereas D.R. Horton involves the workplace and substantive rights granted all employees under the National Labor Relations Act. “Furthermore, AT&T Mobility involved a conflict between the FAA and state law, which is governed by the Supremacy Clause, whereas the present case involves the argument that two federal statutes conflict.”

According to the NLRB opinion from Becker and Pearce, “Clearly, an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7” of the National Labor Relations Act. “Such conduct is not peripheral but central to the act’s purposes.”

The decision will be reviewable by the Eleventh or D.C. Circuit U.S. Court of Appeals. Employers will have to wait and see what the D.C. Circuit does with this decision. However, until then Employers should be cautious when trying to implement compulsory arbitration agreements that contain a class action waiver.