In a decision at odds with the U.S. Supreme Court’s landmark ruling in AT&T Mobility LLC v. Concepcion, the National Labor Relations Board (NLRB) has ruled that employers may not force employees to sign arbitration agreements that include class action waivers. The decision in D.R. Horton, Inc. and Michael Cuda has been highly anticipated since the Supreme Court in AT&T Mobility struck down a California decision that had barred class action waivers as unconscionable. The Supreme Court said in its 5-4 decision that the California rule frustrated the purpose of the Federal Arbitration Act, which was to encourage arbitration. But 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 (NLRA). The NLRB further distinguished AT&T Mobility by noting that it “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.”
The NLRB ruled that employers who force their employees to sign, as a condition of employment, an agreement that precludes them from filing class or collective claims addressing wage issue or other working conditions in any arbitration or judicial forum violate the NLRA. The Board found that Section 7 of the NLRA vests employees with a substantive right to engage in specified forms of associational activity, stating, “The board has long held, with uniform judicial approval, that the NLRA protects employees’ ability to join together to pursue workplace grievances, including through litigation.” The Board added that when Congress enacted the NLRA, it expressly recognized and sought to redress “the inequality of bargaining power between employees who do not possess full freedom of association … and employers who are organized in the corporate form or other forms of ownership association.” The NLRB did not ban agreements that require employees to arbitrate claims relating to workplace issues, but held that such agreements must provide a way for workers to bring class or collective claims in court or in arbitration.
It remains to be seen how the conflict between the U.S. Supreme Court’s decision in AT&T Mobility and the NLRB’s ruling in D.R. Horton will be resolved. In the meantime, it appears that employers who have arbitration agreements containing class action waivers are once again exposed to the possibility of class or collective action law suits over employment-related claims.
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