D. R. Horton.: NLRB Holds Class Action Waiver in Employment Contract Unenforceable

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Embracing a narrow interpretation of the U.S. Supreme Court’s decision in Concepcion, the National Labor Relations Board (NLRB) recently held that a class action waiver was unenforceable under the National Labor Relations Act (NLRA).  D.R. Horton, 357 NLRB No. 184 (Jan. 3 2012) (available here).  At issue was D.R. Horton’s practice of requiring employees to sign an arbitration agreement and class action waiver as a condition of their continued employment.  Id. at 1.  The NLRB held that an agreement proscribing class and representative actions violates section 7 of the NLRA, which gives employees “the right ‘to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .’”  Id. at 2, quoting 29 U.S.C. §157.   

In what may be the decision’s most significant divergence from Concepcion, the NLRB held that there was no conflict between the NLRA and the Federal Arbitration Act (FAA).  See id. at 7-13.  The FAA protects the right of parties to arbitrate statutory claims, provided that “a party does not forego the substantive rights provided by the statute.”  Id. at 9.  Because the NLRA provides a right to engage in concerted activity, any waiver of joint, class, or collective actions may not be enforced.  Id. at 9. 

The decision also limited Concepcion to the facts at issue in that case.  The NLRB recognized that the Supreme Court’s holding was influenced by a desire to maximize the efficiencies of informal arbitration proceedings arising from consumer contracts covering thousands of potential claimants.  Id. at 11.  In contrast to the purported logistical difficulties of arbitrating consumer claims, the NLRB emphasized that arbitration of employment class actions would be less cumbersome and more efficient, because employment claims typically involve relatively smaller classes, which are often further divided into subclasses.  Id. at 11-12.  Other employment class actions are likely to benefit from similar reasoning when confronted with Concepcion.