In D.R. Horton and Michael Cuda, the National Labor Relations Board (NLRB) held that an employer violates the National Labor Relations Act (NLRA) when it requires employees, “as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial.”
The arbitration provision at issue in D.R. Horton provided that all employment-related disputes must be resolved through individual arbitration. It also provided that the arbitrator would not have authority to determine class or collective claims or to award relied to a group or class of employees. The NLRB determined that this type of arbitration agreement violated the employee’s right under the NLRA to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .” 29 U.S.C. § 157.
The NLRB rejected the argument that its holding in D.R. Horton was in conflict with the Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion. In the AT&T case, the Supreme Court held that the Federal Arbitration Act (FAA) preempted a California state rule, which effectively prevented the enforcement of arbitration agreements with class-action waivers. The NLRB reasoned that the AT&T case did not conflict with its holding for multiple reasons:
- The AT&T case did not involve arbitration agreements in the employment context;
- The AT&T case involved a conflict between federal and state law, which is governed by the Supremacy clause, while the NLRA and the FAA are both federal laws;
- Allowing employees to pursue class-action claims in the arbitration context furthers the policies underlying both the NLRA and the FAA; and
- Because the NLRA was enacted after the FAA, it impliedly repealed any inconsistent provisions of the FAA.
The NLRB emphasized that it was not mandating class arbitration and that its holding was only that “employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial.”
Takeaway: It remains to be seen whether the NLRB’s holding in D.R. Horton will be appealed or overturned. In the meantime, an arbitration agreement that requires resolution of employment disputes through individual arbitration and forecloses an employee’s ability to seek class or collective relief arguably violates the NLRA.