Class Action Waivers Validated in NLRB Loss

Background

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 (FLSA) 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, said that the board is currently reviewing the Fifth Circuit decision.

More Cases to Come

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.

Rebekah Mintzer is a reporter for Corporate Counsel, an ALM sister publication of this newsletter in which this article also appeared.

A decision handed down by the U.S. Court of Appeals for the Fifth Circuit in New Orleans in December 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 2013, 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, Nash, Smoak & Stewart, represented D.R. Horton in the case along with Christopher Murray, another Ogletree shareholder.

Background

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 (FLSA) 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, said that the board is currently reviewing the Fifth Circuit decision.

More Cases to Come

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.

Rebekah Mintzer is a reporter for Corporate Counsel, an ALM sister publication of this newsletter in which this article also appeared.