1.09.2012

Recent NLRB Ruling Prohibits Employers from Requiring Employees to Sign Arbitration Agreements that Forbid the Collective Pursuit of Employment-Related Claims

On Friday, January 6, 2012, the National Labor Relations Board (NLRB) released its ruling on the issue of “whether an employer violates Section 8(a)(1) of the National Labor Relations Act when it requires employees covered by the Act, 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.” In D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764 (January 3, 2012), the NLRB concluded that such an agreement unlawfully restricts employees’ Section 7 rights to engage in concerted activity for mutual aid or protection.   
Michael Cuda, the Charging Party, alleged that his employer, D.R. Horton, was misclassifying its superintendents (including himself) as exempt from the provisions of the Fair Labor Standards Act (FLSA). His counsel sought to have the matter certified as a nationwide class action. D.R. Horton countered that the Mutual Arbitration Agreement (MAA) – which was executed by all employees as a condition of employment – solely permitted disputes to be resolved via individual arbitration – thus prompting Mr. Cuda to file an unfair labor practice charge.
At issue in this case were the MAA’s requirements that (i) all employment-related disputes will be determined by a final and binding arbitration and (ii) the arbitrator “may hear only Employee’s individual claims,” “will not have the authority to consolidate the claims of other employees,” and “does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.” 
In concluding that the MAA expressly restricts protected activity, the NLRB reasoned:
The MAA requires employees, as a condition of their employment, to refrain from bringing  collective or class claims in any forum: in court, because the MAA waives their right to a judicial forum; in arbitration, because the MAA provides that the arbitrator cannot consolidate claims or award collective relief. The MAA thus clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.
As such, D.R. Horton was instructed to rescind the MAA or revise it to clarify that employees do not have to waive their right to pursue a class or collective action.
The NLRB further held that the recent United States Supreme Court ruling in AT&T Mobility v.  Concepcion, 131 S. Ct. 1740 (2011) did not require a different result because that matter was a consumer class action that involved a conflict between the Federal Arbitration Act and state law (thereby implicating the Supremacy Clause), whereas the instant case addressed two conflicting federal statutes.
In sum, the NLRB has made clear its position that class action waivers do not belong in the workplace, and requiring such a waiver as a condition of employment is an unfair labor practice. The decision, which applies both to union and non-union workforces, will most assuredly be appealed to a federal court of appeal.



Contact: Jaime A. Maurer
239.338.4258

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