NLRB: Class Action Waivers Violate the National Labor Relations Act

On January 3, 2012, the National Labor Relations Board (“NLRB”) in D.R. Horton and Michael Cuda (Case No. 12-CA-25764) ruled that it is a violation of the National Labor Relations Act (“NLRA”) for employers to require employees to sign mandatory arbitration agreements that do not allow employees to bring class or collective claims before an arbitrator or court.

The decision stemmed from an employer’s mutual arbitration agreement under which both employees and the company waived their right to have their respective claims heard by a judge or jury and agreed to bring all claims before an arbitrator on an individual basis. The agreement also provided that an arbitrator could not consolidate employee claims or certify a class or collective action.

In its decision, the NLRB held that joining workplace claims as a class or collective action constitutes protected concerted activity under Section 7 of the NLRA and the mandatory arbitration agreement unlawfully barred employees from engaging in this protected activity. The NLRB ruled that individual agreements cannot stop employees from pursuing class or collective claims in all forums.

PRACTICE POINTER: Despite this ruling, employers still may require arbitration of any individual employment-related claims so long as employees are not prohibited from seeking class relief. Employers with mandatory arbitration policies should review them in light of this ruling although, initially, it is too soon to determine whether courts will invalidate similar arbitration agreements based on Section 7 and this case. We will continue to track this opinion because we anticipate it will be appealed to the U.S. Court of Appeals.

For additional information on this topic, please contact Douglas S. Zucker at dsz@zuckerhatfield.com or Kathryn V. Hatfield at kvh@zuckerhatfield.com.