NLRB Continues Attack On Class And Collective Action Waivers

There seems to be no end in sight to the standoff between the National Labor Relations Board and at least a majority of the federal courts over the legality of arbitration agreements that require employees to waive the right to lead or participate in class or collective actions. The NLRB has issued a barrage of cases in recent months reaffirming and expanding its controversial theory that this requirement violates the National Labor Relations Act, notwithstanding Supreme Court precedent upholding such waivers under the Federal Arbitration Act in cases involving other statutes. In addition, despite losing twice on this issue at the Fifth Circuit Court of Appeals, the NLRB has continued to advocate its theory in that and other circuits. Meanwhile, the appellate courts remain deluged with petitions to review NLRB decisions invalidating class waivers and the agreements in which they are contained. These and related developments are discussed below.

NLRB Decisions

In D.R. Horton, Inc., 357 NLRB No. 184 (2012), a 3-2 majority of the NLRB decided that requiring employees to agree to a class and collective action waiver in an arbitration agreement violates the NLRA because it deprives employees of the right to engage in protected concerted activity. The Fifth Circuit reversed this decision, however, in view of the Supreme Court precedent upholding class and collective action waivers. D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) (enforcement of NLRB order denied in relevant part).

The NLRB reaffirmed its D.R. Horton theory in a later case, Murphy Oil USA, Inc., 361 NLRB No. 72 (2014). Once again, the Fifth Circuit rejected the NLRB's decision. Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015) (enforcement of NLRB order denied in relevant part). However, the NLRB has announced that it intends to petition the court for an en banc rehearing of this case.

Relying on a policy of "nonacquiescence," the NLRB has refused to defer to the rulings of the Fifth Circuit in D.R. Horton and Murphy Oil, and it has continued to issue numerous decisions reaffirming the principle established in those cases. In doing so, the NLRB has rejected numerous defenses raised by employers. For example, the NLRB has held that:

The six-month statute of limitations in Section 10(b) of the NLRA is ineffective in such cases, even if employees signed the arbitration agreement more than six months before an unfair labor practice charge was filed with the Board. See PJ Cheese, Inc., 362 NLRB No. 177 (2015). An opt-out provision in an arbitration agreement is also ineffective and itself an additional burden on employees' protected rights to pursue collective action. See On Assignment Staffing Services, Inc., 362 NLRB No. 189 (2015). Note, however, that the Ninth Circuit arguably has reached a contrary conclusion in the Johnmohammadi decision discussed below. Even if an arbitration agreement does not include an express waiver of class and collective actions, it is unlawful if the employer interprets the agreement to bar such actions by moving in court to compel arbitration on an individual basis. See Century Fast Foods, Inc., 363 NLRB No. 97 (2016). The fact that an arbitration agreement permits employees to file claims with administrative agencies, which could then pursue a judicial remedy on behalf of employees as a group, is not an effective defense because access to administrative agencies is not the equivalent of access to a judicial forum where employees themselves may seek to litigate their claims on a collective basis. See SolarCity Corporation, 363 NLRB No. 83 (2015). Note, however, that the Eighth Circuit has reached a contrary conclusion in the Owen...