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.”
Employee counsel Palefsky said the ruling, which comes on an issue that has been before the NLRB for several years, is a relief. “If workers had lost the right to bring class actions, that would have undermined so many acts of Congress,” he said.
The original Horton employee who brought the case settled his wage-and-hour claim through an individual arbitration. His counsel, Richard Celler, said the NLRB opinion “smacks of common sense and reasonableness.” Horton employees were represented at the NLRB by lawyers in the board’s office of general counsel; the Department of Labor and the Equal Employment Opportunity Commission both filed amicus briefs urging the NLRB to uphold employees’ right to collective action.
Employer-side lawyers, meanwhile, told me the ruling is a disaster.
“The NLRB is thumbing its nose at private arbitration agreements,” said Marshall Babson of Seyfarth Shaw, who submitted an amicus brief in the case on behalf of the Chamber of Commerce. (All the case documents are available at the NLRB’s website.) “The National Labor Relations Act is not intended to be a super-class-action statute.” Babson said the board’s assurance that its ruling will have limited effect, since (unlike Concepcion) it applies only to employment arbitration agreements, is “breathtaking in its lack of understanding.” At a minimum, Babson said, the ruling will affect tens of thousands of employees with no-class-action clauses in employment agreements that mandate arbitration. “Every guy on Wall Street signed one of these agreements,” he said.
Charles Sims of Proskauer, who submitted an amicus brief for the Retail Industry Leaders Association, said the ruling “drives an enormous hole through U.S. Supreme Court holdings of the last years.” Even if Concepcion doesn’t specifically address the same circumstances as Horton, Sims said, the Court’s deference to private arbitration agreements is clear, and the NLRB disregarded it.
Horton is represented by Ogletree, Deakins, Nash, Smoak & Stewart, which didn’t respond to a request for comment. The company has the right to appeal the NLRB’s ruling to either the U.S. Court of Appeals for the District of Columbia or the federal appellate court in which the alleged violation took place.
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