12.12.2013

Federal Court Rules that Class Waivers Do Not Necessarily Violate the National Labor Relations Act (“NLRA”)


In D.R. Horton v. National Labor Relations Board, 2013-WL-6231617 (5th Cir.), the federal Fifth Circuit court of appeals held that an employer could enforce a compelled arbitration agreement that prohibits an employee from initiating a class or collective action involving multiple other plaintiffs against his employer. The court overruled the National Labor Relations Board (“NLRB”), which held that upholding such an agreement would restrict the protected rights of employees to engage in concerted activity. (See “Recent NLRB Ruling Prohibits Employers from Requiring Employees to Sign Arbitration Agreements that Forbid the Collective Pursuit of Employment-Related Claims,” January 9, 2012.) The Fifth Circuit disagreed and held that the Federal Arbitration Act and its allowance of arbitration agreements containing class waivers does not in and of itself conflict with worker protections under the NLRA. The court also noted that the other federal circuits that have addressed this issue (the Ninth, Second, and Eighth) have also taken a position similar to the Fifth Circuit’s.

This case is especially important when considering the increased number of wage and hour claims filed both under the federal Fair Labor Standards Act (FLSA) and comparable state wage and hour laws. A common practice of plaintiffs’ attorneys upon meeting a potential client regarding an employment issue is to ask them how they are compensated, especially when it comes to overtime payments. Wage and hour laws can be complicated, and many employers who have not sought legal advice on their policies may not be in full compliance. Wage and hour claims may therefore be tacked on to other employment claims that plaintiffs have, and the potential for multiple plaintiffs in these types of claims can expose employers to increased financial liability. The best practice is to have an experienced attorney review employment policies to determine whether they comply with applicable law, and what actions, such as class waivers, may also aid in limiting employer exposure to suit.  



Contact: Shawn Romer
330.762.7996
sromer@ralaw.com

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