Employment lawyers get excited about the little things – the changes and wrinkles in the law. Arbitration, though not a little thing, is currently undergoing such a wrinkle in time. Last year, after a string of pro-employee rulings, the United States Supreme Court finally issued two opinions which we hoped would help clarify arbitration issues and help employers. First, in 14 Penn Plaza LLC v. Pyett, the Court allowed employers to require employees to agree in advance to arbitration of any statutory claims the employee could later bring in a private proceeding. Second, the holding in ATT Mobility v. Concepcion (a non-employment case), paved the way for employers to require employees to have statutory claims heard individually, rather than as part of a class action. The hope was to curtail class action litigation, especially in the FLSA wage and hour context, that can last for years, at great expense. It appeared employers had received a victory – crucial, although small.
That victory, however, was short-lived. Earlier this month, the National Labor Relations Board (NLRB) issued an opinion that directly contradicted the pro-arbitration stance of the Supreme Court's 2011 rulings. In a last-minute ruling before the expiration of the terms of two NLRB members, the arbitration hopes of employers were dashed. In D.R. Horton, Inc., 357 N.L.R.B. No. 184 (Jan. 3, 2012), the NLRB held that the employer committed an unfair labor practice by requiring employees to sign a mandatory arbitration agreement which both: (1) forced employees to submit employment-related disputes to binding arbitration; and (2) prohibited the arbitrator from considering these disputes as part of a class or collective action. This opinion resulted from a 2008 case where a former D.R. Horton employee attempted to initiate an FLSA collective action arbitration and the employer relied on the contractual terms of its arbitration agreement with the employee.
The NLRB held that the arbitration agreement violated the National Labor Relations Act (NLRA) because it prohibited employees from participating in protected concerted activity – activity which could help employees organize a union. The NLRB also took issue because the arbitration agreement appeared to limit the rights of employees to file charges with the NLRB. Recognizing the implications of its opinion, the NLRB attempted to distinguish the ATT Mobility v. Concepcion case by noting that in that Supreme Court case involved a conflict between the Federal Arbitration Act (FAA) and California state law; whereas the arbitration agreement in the D.R. Horton case involved a potential conflict between two federal statutes, the FAA and the NLRA.
The result for employers is uncertain. If you have an arbitration agreement that prohibits class actions, you may be following the Supreme Court's view of the law, but violating the NLRB's interpretation of the NLRA. If so, you may the target of an unfair labor practices charge filed with the NLRB. If you chose to change your arbitration agreement to comply with the NLRB's view, you may be opening the way for class or collective actions filed by employees or allowing employees to file an NLRB charge. Doomed (to put it nicely) either way. While it is expected that legislation will be introduced to either undermine or bolster the D.R. Horton opinion or that the Supreme Court will consider the issue years from now, the uncertainty for employers remains. One thing, however, remains certain – employment lawyers will be excited (and will blog) about the next arbitration wrinkle in time.
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