In a decision that may have wide-ranging effects for all employers, the National Labor Relations Board ("NLRB") recently ruled that class action waivers in employee arbitration agreements violate federal labor law and are therefore unenforceable. The decision greatly limits the United States Supreme Court's April 2011 decision in AT&T Mobility LLC v. Concepcion, which held that the Federal Arbitration Act ("FAA") preempts state laws barring the use of class action arbitration waivers.
In D.R. Horton, Inc., the NLRB considered a mandatory arbitration agreement that required employees to submit all employment-related claims to arbitration, and prohibited class or collective action proceedings, either in arbitration or in court. The NLRB held that the agreement's class action waiver could not be reconciled with the National Labor Relations Act or the Norris-LaGuardia Act, both of which guarantee employees the right to engage in collective action. The NLRB reasoned further that employees' collective action rights are substantive, not procedural, and therefore should not yield to the broad pro-arbitration policy set forth in the FAA and reaffirmed by the Supreme Court in Concepcion. The NLRB's decision is likely to be appealed to federal court. Therefore, employers may consider waiting to amend their agreements until any challenges to the NLRB's decision are resolved.
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