D.R. Horton: NLRB to Determine Scope of Concepcion

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In the latest action that will define the reach of the Supreme Court’s April ruling in AT&T Mobillity v. Concepcion, 131 S.Ct. 1740 (2011), the National Labor Relations Board (NLRB) will determine whether class action waivers in arbitration agreements violate the guarantee under the National Labor Relations Act (NLRA) that all non-government workers—union and non-union alike—must be permitted to engage in “concerted activities for the purpose of collective bargaining or other mutual aid and protection.”  29 U.S.C. § 157 (2011).  The case, D.R. Horton, Inc. (NLRB Case No. 12-CA-25764), has been fully briefed, and the NLRB may issue its ruling at any time.  Irrespective of the outcome, the losing party is expected to file an appeal, most likely in the Ninth Circuit.

At stake is whether Concepcion, which concerned a consumer contract, is properly applied to employment contracts.  If so, employers could insulate themselves from virtually all class actions seeking the enforcement of workplace laws by inserting arbitration clauses and class action waivers among the stacks of documents new employees sign.  Such a result could lead to the elimination of class actions in the employment context, since few workplace laws carry significant enough damages and penalties to justify individual lawsuits.  This could, in turn, result in the non-enforcement of a broad swath of employment laws.  By contrast, if the NLRB rules that Concepcion is inapplicable to employment contracts, workers’ long-standing ability to seek redress for violations of labor and employment laws, such as unpaid overtime or minimum wages, will remain intact.

Like Concepcion, the D.R. Horton case has its roots in California, as employees of homebuilder D.R. Horton, Inc. seek unpaid overtime by way of class-wide arbitration.  When the company invoked the class action waiver contained in the employees’ arbitration agreements, the employees responded by filing an NLRB complaint, alleging a violation of the NLRA’s “concerted activities” guarantee.  By making the NLRA guarantee the key issue of this case, the D.R. Horton plaintiffs will force the NLRB (and eventually, the Ninth Circuit) to address the tension between the federal government’s purportedly strong preference for arbitration, embodied in the Federal Arbitration Act, and the NLRA’s express protection of collective action by workers.  D.R. Horton is expected to be the second significant decision defining the application of Concepcion to workplace-protection statutes; this past July, in Brown v. Ralph’s Grocery Co., the California Court of Appeal held that Concepcion does not apply to the California Labor Code’s Private Attorneys General Act (PAGA).