|
THE ISSUE
D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012)
Under the facts of that proceeding, the corporation required its employees, as a condition of their employment, to sign arbitration agreements mandating the individual arbitration of employment related disputes and prohibiting any consolidation of cases or proceeding as a class or collective actions in any forum, arbitral or judicial. The Board determined that the agreement violated the fundamental principles sought to be protected by the NLRA, notably the right to engage in concerted activities for the purpose of "mutual aid or protection" - i.e. the right to join together to pursue workplace grievances.
THE REASONING
In its lengthy decision, the Board took pains to counter arguments that the outcome would undermine the policies underlying the Federal Arbitration Act (FAA) and contradict recent United States Supreme Court decisions interpreting the FAA.
DECISION NOT IN CONFLICT WITH FAA
While acknowledging the FAA's broad and significant purpose in protecting the enforceability of arbitration agreements, the Board explained why its decision is not in conflict with FAA policy. The NLRB:
- Distinguished its holding as one squarely addressing the infringement of rights under the NLRA and the restriction placed on collective activity, not on the requirement to arbitrate.
- Explained that pursuant to the language of the FAA itself, arbitration agreements are enforceable so long as the parties are not forced to compromise any substantive rights under the relevant laws at issue.
- Held that a restriction on an employee's right to proceed with collective legal action would deprive the employee of his substantive rights to engage in "concerted activity" under the NLRA.
- Reasoned that such an agreement would be against public policy and thus would be held unenforceable both under general contract law as well as the FAA.
SUPREME COURT DECISIONS NOT CONTROLLING
The Board also distinguished its decision from the recent United States Supreme Court ruling in AT&T Mobility v. Concepcion. In that case the Supreme Court held that the FAA preempted California law that invalidated class action waivers in arbitration agreements as unconscionable. Among the several distinctions noted:
- AT&T Mobility involved a consumer class action arbitration agreement, not an employment agreement that directly impedes substantive rights protected by the NLRA.
- The NRLB decision would have limited impact, only affecting agreements between employers and employees, and then likely only a specific subset of those employer's employees.
- The consumer contracts distinguished in AT&T Mobility could cover tens of thousands of potential claimants and the speed, informality and cost of arbitration is a weighty consideration in its favor.
THE IMPACT
The Board concluded by reiterating that the scope of its decision is merely to prohibit employers from severing all avenues for employees to bring joint, class or collective claims.
- The Board affirmatively stated the decision does not preclude the employer from requiring arbitration with regard to individual claims so long as the employer leaves open "judicial forums for class or collective claims."
- It expressly did not reach the issue of whether an employer can require employees, as a condition of employment, to waive their right to pursue class or collective action in court so long as the employees retain the right to pursue such claims in arbitration.
- It also did not address the viability of an agreement to resolve potential employment disputes through non-class arbitration where that agreement is not a condition of employment.
Please contact Nukk-Freeman & Cerra immediately should you need assistance reviewing your Employment and Arbitration Agreements
to determine how they are affected by this new ruling.
Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency.
| 
