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 employers cannot require employees to waive the ability to bring class action lawsuits as a condition of employment. Doing so is an unlawful restriction on employees’ rights to “engage in...concerted activities for the purpose of collective bargaining or other mutual aid or protection,” which is guaranteed by 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 right to bring class 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 class action waivers in consumer arbitration agreements. Concepcion invalidated state law that prohibited class action waivers, relying heavily on the Federal Arbitration Act (“FAA”) and strong federal policy in favor of arbitration agreements.
In distinguishing Concepcion, D.R. Horton noted that the case did not involve 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, employers’ cannot restrict employees from engaging in their substantive right to bring class action lawsuits. As such, the NLRB determined that requiring employees to agree to waive class action lawsuits offended the NLRA.
It is important to note that the D.R. Horton decision did not find that partial or limited class action waivers are unlawful. As long as there remains some avenue for bringing class claims—even if only, for example, via class arbitration—a waiver might be upheld. In fact, the NLRB noted that its decision did not “mandate class arbitration in order to protect employees’ rights under the NLRA,” but rather found “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.” In addition, the NLRB refrained from deciding whether class waivers that are not required as a condition of employment constitute an unfair labor practice.
D.R. Horton is currently on appeal to the Fifth Circuit Court of Appeals, and it is too early to tell what kind of effect it will have on enforcement of classaction waivers in courts across the country. A few federal district courts have already referenced the case in passing, but none have applied, let aloneengaged in a detailed analysis of, its holding.
Employers often include class action waivers in arbitration clauses contained within employment applications or handbooks. The ultimate impact of D.R.Horton on these provisions won’t be known until the case makes its way through the appeals process. For now, because NLRB decisions are not binding on judicial courts, class action waivers are still enforceable in civil lawsuits. However, it is important for both union and non-union employers to understand and comply with the D.R. Horton decision or risk NLRB charges for engaging in unfair labor practices.
If you have any questions regarding the D.R. Horton or wish a copy of the opinion or otherwise have a question regarding an issue of labor law, employment practice liability or the employment relationship, please feel free to call any one of our Employment Practices Group Members.
