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« NLRB Law Memo 07/17/2009 | Main | NLRB Law Memo 01/26/2012 »

NLRB Law Memo 01/06/2012
by Ross Runkel at LawMemo

NLRB - Certain mandatory arbitration agreements violate federal labor law.

D. R. Horton, Inc. and Michael Cuda. Case 12–CA–25764 (01/03/2012)

The NLRB has ruled that it is a violation of federal labor law to require employees to sign arbitration agreements that prevent them from joining together to pursue employment-related legal claims in any forum, whether in arbitration or in court.

The Board said:

"In this case, we consider whether an employer violates Section 8(a)(1) of the National Labor Relations Act when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial. For the reasons stated below, we find that such an agreement unlawfully restricts employees’ Section 7 right to engage in concerted action for mutual aid or protection, notwithstanding the Federal Arbitration Act (FAA), which generally makes employment-related arbitration agreements judicially enforceable. In the circumstances presented here, there is no conflict between Federal labor law and policy, on the one hand, and the FAA and its policies, on the other."

The decision examined one such agreement used by nationwide homebuilder D.R. Horton, under which employees waived their right to a judicial forum and agreed to bring all claims to an arbitrator on an individual basis. The agreement prohibited the arbitrator from consolidating claims, fashioning a class or collective action, or awarding relief to a group or class of employees.

The Board found that the agreement unlawfully barred employees from engaging in “concerted activity” protected by the National Labor Relations Act. The Board emphasized that the ruling does not require class arbitration as long as the agreement leaves open a judicial forum for group claims.

Chairman Mark Gaston Pearce and Member Craig Becker joined in finding the agreement unlawful. Member Brian Hayes was recused from the case. The decision was finalized on Jan. 3, but was issued publicly by the agency Jan. 6.

The decision requires Horton to rescind the agreement or revise it to make clear to employees that they are not waiving their right to pursue a class or collective action in all forums.

It is noteworthy that this decision will apply to private sector employers whether or not they are unionized.

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