Fifth Circuit Upholds Legality of Class Action Arbitration Waivers

D.R. Horton v. National Labor Relations Board [pdf] concerns whether, under the National Labor Relations Act, an employer can enforce against its employees an arbitration agreement under which the employees agree to arbitrate all employment claims, but waive their right to do so as a class or collective action in any forum.

The NLRB had held that such an agreement violates the NLRA by unlawfully limiting the employees’ rights to engage in protected concerted activity.

Yesterday, in reviewing that NLRB decision, the 5th Circuit Court of Appeals disagreed, and overturned the NLRB’s efforts to invalidate all attempts by employers to ban class arbitrations.

In its ruling, the Court concluded that the Board had overstepped its bounds by ignoring the implication of the Federal Arbitration Act. The opinion is an interesting read for those interested in agency deference and statutory interpretation. Otherwise, all you need to know about this opinion is that class action waivers are legal, so long as employees cannot reasonably read them to restrict their right to file unfair labor practice charges with the NLRB.

Readers of my blog will know that I am not a fan of employment arbitration agreements. Nevertheless, for employers who favor this tool, this case is a huge victory in confirming the scope of how far an employer can go with such an agreement.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Hyman at (216) 736-7226 or jth@kjk.com. You can also follow Hyman on Twitter at @jonhyman.