The National Labor Relations Board stood up staunchly for the rights of employees Friday. In an 18-page ruling in a case called D.R. Horton, Inc. and Michael Cuda, the NLRB chairman and two members of the board held that a company may not cut off employees’ rights to collective action through private arbitration agreements. The ruling does not say employees are always entitled to litigate claims via class actions, but concludes that “employers may not compel employees to waive their [National Labor Relations Act] right to collectively pursue litigation of employment claims in all forums, arbitral and judicial.”
Early reports on the Horton decision have called it a repudiation of the U.S. Supreme Court’s June 2011 decision in AT&T Mobility v. Concepcion, which isn’t quite right. Concepcion upheld AT&T’s right to compel consumers to submit to arbitration even though a California state law seemed to permit them to bring a consumer class action. Shrewd employment lawyers subsequently pounced upon Concepcion (in combination, of course, with Wal-Mart v. Dukes) to make headway in employment class actions against their clients; according to a just-released study on employment class-action litigation by Seyfarth Shaw, Concepcion had already been cited in 215 judicial rulings by the end of 2011. But according to Cliff Palefsky of McGuinn, Hillsman & Palefsky, who advocated for employees’ rights in the Horton case, the NLRB correctly drew a distinction between the issues in Concepcion and the real issue confronting employment litigators: an apparent conflict between labor laws and the Federal Arbitration Act, which empowers corporations to enforce private employment-related arbitration agreements.
In D.R. Horton, the NLRB concluded that employees’ federal rights under the National Labor Relations Act and its predecessor, the Norris LaGuardia Act, include the absolute right to collective action — either through a consolidated arbitration or a class action. It’s important to remember that in the D.R. Horton arbitration agreement at the heart of the case, Horton employees had to agree to adjudicate claims through binding, individualized arbitration and to waive any right to bring class action claims. The board balanced Horton’s rights under the Arbitration Act against its employees’ rights under the NLRA, and found that public policy and accommodation analysis favor employees.
“Holding that an employer violates the NLRA by requiring employees, as a condition of employment, to waive their right to pursue collective legal redress in both judicial and arbitral forums accommodates the policies underlying both the NLRA and the FAA to the greatest extent possible,” the ruling said.
The NLRB took care to note that it was not specifically ordering Horton to permit employees to bring classwide arbitrations or class actions — rather, it was preventing it from barring both routes to collective action. “We need not and do not mandate class arbitration in order to protect employees’ rights under the NLRA,” the ruling said. “So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration. Employers remain free to insist that arbitral proceedings be conducted on an individual basis.”