Fifth Circuit Tosses NLRB Ruling in Arbitration Fight
Siding with the defense in a closely-watched employment case, the U.S. Court of Appeals for the Fifth Circuit on Tuesday upheld the use of class or collective action waivers in arbitration agreements.
The decision in D.R. Horton Inc. v. National Labor Relations Board, argued before the court back in February, overturned the NLRB’s previous decision, which held that the massive Texas-based residential building company was violating the National Labor Relations Act when it required employees to sign a waiver that prevents them from entering class or collective actions against their employer.
Ron Chapman Jr., shareholder at Ogletree Deakins, represented D.R. Horton in the case along with Christopher Murray, another Ogletree shareholder. Chapman told CorpCounsel.com that he believes the ruling is a victory not just for his client but for employers across the country.
“We’re obviously thrilled with the decision—it validates the position we’ve been taking for a long time now,” he said.
In 2006, D.R. Horton began making its workers sign a “Mutual Arbitration Agreement,” which required that employees use final and binding arbitration to resolve claims and disputes rather than bringing them before a court of law. The agreement also included a class and collective action waiver. Michael Cuda, a D.R. Horton superintendent who had signed the agreement, along with a class of similarly situated superintendents, tried to get a Fair Labor Standards Act (FSLA) case arbitrated as a class, only to be barred from doing so. Cuda then filed an unfair labor practice charge under the NLRA.
Chapman said that the waivers in question in the case are becoming increasingly common, as companies respond to an uptick in class action litigation from employees. He added that he believes the labor board is broadening its interpretation of the NLRA—and that informed their decision to bring the case.
“I would say that the court of appeals reminded the NLRB that while it is authorized to interpret the NLRA, it is not authorized to ignore other statutes,” said Chapman. “And the NLRB’s interpretation I think was overbroad in this case, and that created the conflict with the FAA [Federal Arbitration Act].”
Gregory King, director of the NLRB Office of Public Affairs, told CorpCounsel.com that the board is currently reviewing the Fifth Circuit decision.
Ronald Meisburg, partner in the labor and employment law department at Proskauer Rose, co-head of the firm’s labor-management relations practice group and a former general counsel of the NLRB, told CorpCounsel.com that the Fifth Circuit ruling was a “big victory” for D.R. Horton.
However, Meisburg noted that the verdict likely won’t stop the NLRB from issuing more complaints on the waiver issue, because they maintain a “doctrine of non-acquiescence,” due to their position as an organization of national scope. “They’re not going to necessarily change their policy because they lose in one court of appeals in one circuit,” he said, adding that litigation on the topic is probably not over until more courts rebuke the NLRB directly or the issue gets pushed to the U.S. Supreme Court.
The NLRB is getting increasingly likely to pursue cases like the one against D.R. Horton, according to Meisburg. “The board in general over the last few years has been more focused on what they call ‘protected concerted activity,’ ” he said. This is defined as the right to band together to improve pay and working conditions, with or without a union.
Chapman said that by validating the use of class action waivers, D.R. Horton’s victory in court may prompt employers of every size “to consider whether to implement a class action waver in an arbitration agreement.”
And at companies that do decide to use these legal tools, he explained, it’s best to stay current, as the law is always evolving. “For those employers that have older arbitration agreements in place, they really need to dust them off and make sure they’re up to date,” he advised.