NLRB finds that arbitration provision violates national labor relations act

J. Mark Baird
February 7, 2012 — 2,332 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

On January 3, 2012, the National Labor Relations Board (NLRB) held that a mandatory arbitration agreement between D.R. Horton and its employees violated the National Labor Relations Act (NLRA) because it required employees to waive their rights to participate in class or collective actions. Under the agreement, both D.R. Horton and its employees waived their right to have their claims heard by a judge or jury. The agreement also provided that an arbitrator "may hear only Employee's individual claims and does not have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding."

An employee filed an unfair labor practice with the NLRB, claiming that the arbitration provision prevented employees from pursuing wage claims under the Fair Labor Standards Act as a class or collective action in court. Reasoning that class or collective actions are a form of protected concerted activity under Section 7 of the NLRA, the NLRB ruled that the arbitration agreement violated Section 8(a)(1) of the NLRA because it interfered with employees' rights to engage in protected, concerted activity. In essence, the NLRB ruled that individual agreements cannot preclude employees from pursuing class or collective claims in all forums. As a result, the NLRB required the employer to revise or rescind its mandatory arbitration agreement and also to provide notice to employees of the revised or rescinded agreement and of employees' rights under the NLRA.

The NLRB also explained that its decision did not prohibit arbitration agreements from containing class-action waivers in the arbitral forum, as long as employees remain free to address their concerns collectively in another forum (i.e., in court).

The Board's decision applies only to "employers" and "employees" covered under the NLRA. Further, the decision does not affect collectively bargained waivers of employees' rights to bring class or collective actions. While the decision is arguably in conflict with United States Supreme Court precedent and will likely be appealed, if the decision stands, many employers will need to revise their arbitration agreements to withstand legal challenge under the NLRA.



J. Mark Baird

J. Mark Baird and Beth Doherty Quinn, the employment law attorneys at Baird Quinn, LLC have practiced law for more than 25 years and 15 years, respectively, with an emphasis on employment law and labor-management. They have extensive experience litigating employment law matters, including discrimination, harassment, unlawful termination, wage and hour, retaliation, unfair labor practice, non-compete/employee loyalty, and breach of contract. They also litigate commercial fraud matters. Not only have they represented clients before a variety of administrative agencies and courts, Mr. Baird and Ms. Doherty Quinn have conducted numerous seminars, such as seminars on ADA compliance, and in-house training for clients regarding sexual and employer harassment and other Title VII discrimination issues as well.