After D.R. Horton v NLRB Ruling Employers Free to Use Class Action Waivers in Arbitration Agreements

“This is an enormous victory for employers because a class action waiver can defeat a class or collective action at the outset.” (Ron Chapman, JD Supra Perspectives)

Earlier this month, an appeals court rejected a National Labor Relation Board (NLRB) ruling that employee class action waivers violate federal labor laws.

Ron Chapman – the lawyer who successfully led the defense of employer D.R. Horton – explains:

“The Fifth Circuit ruled employers can have arbitration agreements that contain class action waivers without violating the [National Labor Relations Act (NLRA)]. Previously, the NLRB had ruled that a class action waiver violates employees’ right under the NLRA to engage in concerted activity. The Fifth Circuit disagreed, finding that nothing in the NLRA trumps the congressional mandate of the Federal Arbitration Act requiring arbitration agreements to be enforced according to their terms.”

For your reference, here’s a look at what attorneys on JD Supra are writing about the ruling:

Fifth Circuit Rejects NLRB’s D.R. Horton Decision (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.):

“On December 3, 2013, the Fifth Circuit held that the NLRB’s decision in D.R. Horton violated the Federal Arbitration Act (FAA). That statute generally requires courts to enforce arbitration agreements according to their terms, subject to limited exceptions. The court held that no exceptions applied in this case. First, the court held that the FAA’s ‘savings clause’ did not cover the NLRB’s decision. That ‘savings clause’ allows courts to refuse to enforce arbitration agreements on the same grounds that apply to any other contract. The NLRB argued that its decision fell within this ‘savings clause’ because it banned class action waivers in all employment agreements, not only arbitration agreements.” Read on>>

D.R. Horton and the Doctrine of Non-Acquiescence (Proskauer):

“It is highly likely that the Board will want this issue to play out in other cases in other courts of appeals. If a significant number of courts continue to reject the Board’s approach, then the Board may consider overruling or modifying the D.R. Horton doctrine in the future. (It should be noted that an adverse decision from the District of Columbia Circuit may speed up this process, because any charged party respondent who loses before the Board can appeal to the District of Columbia Circuit.)” Read on>>

Fifth Circuit Further Strengthens Class Action Waivers With Latest DR Horton Decision (FordHarrison):

“This decision is good news for employers and should further solidify the enforcement of class action waivers in arbitration agreements, resulting in less liability in hot-topic areas for employers, such as collective actions brought under the Fair Labor Standards Act.” Read on>>

Fifth Circuit Rejects NLRB Ruling Invaliding Class Action Waivers in Arbitration Agreements (Ballard Spahr LLP):

“The court was impressed that every other circuit to consider the application of the NLRB’s opinion to a class action waiver in an arbitration agreement has rejected that argument and found such waivers enforceable. In dissent, Judge James E. Graves, Jr., wrote that he would affirm the NLRB’s opinion, thus insuring that the debate over the NLRB’s D.R. Horton decision will continue.” Read on>>

Arbitration Agreements Can Be Used to Avoid Class Claims Under Labor Laws (Miller Canfield):

“Requiring that class arbitration must be available would make arbitration much less attractive to employers and would require additional formal procedures and protections that defeat the FAA’s central statutory purpose and scheme. Thus, the question was whether the NLRA completely trumps the FAA. According to the Fifth Circuit, it does not. Labor law endorses arbitration, and the Board – as the opponent of arbitration – failed to meet its burden to defeat the arbitration agreements.” Read on>>

Fifth Circuit Overrules NLRB, Finds D.R. Horton May Preclude Class Arbitration (Leonard, Street and Deinard):

“On a different issue, however, the court upheld the NLRB’s decision.  It found that the [Mutual Arbitration Agreement (MAA)] improperly gave the impression that an employee was waiving his or her administrative rights.  (The agreement included the employee’s waiver of ‘the right to file a lawsuit or other civil proceeding relating to Employee’s employment with [Horton].’)  Therefore, the court held the Board properly forced the builder to change that language in its MAA.” Read on>>

Fifth Circuit Rejects NLRB’s D.R. Horton Decision – Too Soon For Champagne? (BakerHostetler):

“So, is D.R. Horton just a bad memory for employers at this point? Unfortunately, the final outcome is tied up in a bundle of issues that only a Constitutional Law professor could love. First, the 800-pound gorilla named Noel Canning remains in the room. The Supreme Court has scheduled oral argument in that case for January 13, 2014, and an opinion likely will be issued in June. If the Supreme Court rules that the NLRB was not properly constituted at the time D.R. Horton was issued, this could potentially wipe the entire case away. And while it may initially sound attractive, it might only mean that the current Board could take up the issue again and try a different rationale.” Read on>>

Read more on D.R. Horton at JD Supra Law News>>