NLRB INVALIDATES CLASS ACTION WAIVERS 

IN EMPLOYMENT ARBITRATION AGREEMENTS

Charles D. Lawson

On January 3, 2012, the National Labor Relations Board ("NLRB" or "the Board") announced that employers could no longer require employees to sign arbitration agreements in which they waived their right to participate in any form of class action. At issue in D.R. Horton Inc. and Michael Cuda, Case 12-CA-25764 (January 3, 2012) was an arbitration agreement that provided that:

(1) all disputes and claims relating to the employee's employment would be determined exclusively by final and binding arbitration;

(2) an arbitrator could hear only an employee's individual claims, while being precluded from consolidating the claims of other employees or fashioning a proceeding as a class or collective action; and

(3) the employee waived the right to file a lawsuit or other civil proceeding relating to Employee's employment with the employer.

The NLRB observed that such a "class action waiver" precluded an employee from taking joint or collective action in either an arbitral or judicial forum. The Board thus held the provision violated the federal National Labor Relations Act ("NLRA") which guarantees workers the right to engage in "concerted action" to protest wages or other terms and conditions of employment. The Board's ruling applies to white-collar employees of private companies, as well as to unionized workers, but not to management employees or government workers.

Opponents of the decision declare that the Board's ruling flies in the face of recent U.S. Supreme Court cases holding that class waivers must be permitted under the Federal Arbitration Act ("FAA"),1 and that the ruling elevates the "procedural" right to a class action over the "substantive" right under the FAA to have an arbitration agreement enforced as written. The NLRB, however, takes the position that it is not refusing to permit class action waivers, generally, but simply holding that an employer may not require employees to surrender their ability to act collectively in both arbitration and litigation.

The Board's decision will almost certainly be challenged in federal court. For now, however, employers should allow their Labor and Employment counsel to review any arbitration agreement they plan to present to their employees to be sure it does not run afoul of the NLRB's latest pronouncement.

If you would like more information or would like your arbitration agreements reviewed, please contact the author or any member of our Labor and Employment Group.

1 See, e.g., AT&T Mobility v. Concepcion, 131 S.Ct. 1740, 1751-1753 (2011) (claim that class-action waiver in consumer arbitration agreement was unconscionable under state law was preempted by FAA).

About the author: Mr. Lawson received his B.S. from the University of Tennessee at Chattanooga, magna cum laude, in 1994, and his J.D. from Vanderbilt University in 1997 where he was elected to the Order of the Coif. He is a member of GKH's Labor and Employment group and specializes in all phases of the employer-employee relationship, including wage and hour, FMLA, ADA, unemployment compensation, and discrimination/harassment law. He provides regular employer counseling on issues ranging from workplace policy development and labor law compliance to non-competition and confidentiality issues. He also defends employment claims filed with administrative bodies such as the EEOC and the Tennessee Human Rights Commission, as well as claims filed in state and federal court. Mr. Lawson's work with employers is designed to educate them about particular areas of the law governing the employment relationship, with a focus on minimizing exposure to employment-related claims and providing cost-effective litigation strategies should litigation arise.

This blog is not intended to create an attorney/client relationship or provide legal advice. Please contact the author if you have any questions or comments regarding the subject matter.