Fifth Circuit Rules that NLRA Does not Prevent Class Action Waivers -- D.R. Horton v. NLRB

In 2007, the California Supreme Court held that class action waivers by employees were (almost always) unenforceable. This result was upended, however, by the U.S. Supreme Court's decision in AT&T Mobility v. Concepcion, which held that under the Federal Arbitration Act ("FAA") such waivers were (almost always) enforceable, and that the FAA preempted any state rule to the contrary. This set off an "arbitration war" whereby pro and anti class action courts have sought to either apply or distinguish Concepcion in employment cases. One of the most interesting pro-class action decisions came from the National Labor Relations Board, which held that: (a) wage and hour class actions are a non-waivable form of "protected concerted activity" under Section 7 of the National Labor Relations Act ("NLRA"); (b) the FAA does not preempt the later-enacted NLRA; therefore: (c) the FAA cannot be read as allowing waiver of class action rights protected under the NLRA. This reasoning, however, has now been rejected on appeal by the Fifth Circuit in D.R. Horton v. NLRB. The Fifth Circuit was sympathetic to (without quite endorsing), the premise that class action lawsuits are "protected concerted activity" under Section 7 of the NLRA. However, the Court held that the employer's right to require individual arbitrations under the FAA should nevertheless trump an employee's right to engage in concerted action under the NLRB. The Fifth Circuit's reasoning on this point is lengthy but not particularly impressive. The Board's central point was that Section 7 rights are different from other statutory claims because the NLRA's "fundamental precept is the right for employees to act collectively." But the Court never grappled with that point directly. Instead it based its decision on the fact that the NLRB does not specifically refer to arbitration. In effect, the Fifth Circuit is holding that workers may have the substantive right to seek better working conditions - but they can be required to pursue these goals solely on an individual basis. It should be pretty obvious that this is a direct negation of employees' right under Section 7 to engage in mutual aid and support by acting in concert. It's a bit like having a worker sign an agreement that nominally preserves his substantive right to picket, but requires him to stand on the street corner all by himself.

Wal-Mart v. Dukes does not apply to California Wage and Hour Class Actions -- Williams v. Superior Court (Allstate Ins. Co.)

In Wal-Mart v. Dukes, the U.S. Supreme Court rejected a proposed class of 1.5 million women who claimed they were discriminated against in separate hiring and promotion decisions by different managers throughout the nation.  Many defendants (and a few courts) read this federal Title VII decision for the proposition that statistical evidence was somehow an improper method of proof in class actions -- a method which was denigrated by the short-hand term "trial by formula."

The decision of the California Court of Appeal in Williams v. Superior Court (Allstate) makes clear, however, that the analysis of the proposed Title VII class in Dukes has little or no application to California wage and hour claims.   As the Court explained, “We agree with those courts that have found Dukes distinguishable in comparable situations.”

Indeed, the Court's four-page distinguishing analysis of Dukes is extremely thorough. In particular, the Williams Court noted that Dukes was concerned with provisions of federal Rule 23 that do not apply under California Code of Civil Procedure Section 382.  As a result, "the trial court's reliance on Dukes analysis of subpart (b)(2) of Rule 23 – a class action seeking injunctive relief – was thus misplaced because appellant’s class members here were seeking principally, if not exclusively, monetary damages."  

In addition, wage and hour claims normally turn on objective standards regarding the number of hours worked and wages paid.  For class certification purposes such claims are thus fundamentally different from the discrimination claims at issue in Dukes "which depended on proof of the subjective intents of thousands of individual supervisors."

Finally, the Williams Court clarified the phrase "Trial by Formula," explaining that statistical inference is a perfectly valid method of establishing damages, and is no obstacle to certification where a class-wide policy or practice is alleged as the basis for liability.

Trial by Formula is a method of calculating damages. Damage calculations have little, if any, relevance at the certification stage before the trial court and parties have reached the merits of the class claims. At the certification stage, the concern is whether class members have raised a justiciable question applicable to all class members. Although Allstate may have presented evidence that its official policies are lawful, this showing does not end the inquiry.  Here, the question is whether Allstate had a practice of not paying adjusters for off-the-clock time.  The answer to that question will apply to the entire class of adjusters. If the answer to that question is “yes” – which is the answer the trial court initially assumed when it first certified the Off-the-Clock class, and is the answer we must presume in reviewing decertification (Brinker, supra, 53 Cal.4th at p. 1023) – then, in Duke’s phrase, that answer is the “glue” that binds all the class members. If some adjusters had more uncompensated time off the clock than other adjusters, that difference goes to damages.

(Internal punctuation and citations omitted). 

Williams continues the recent post-Brinker trend of finding that class treatment of California wage and hour claims is generally proper so long as the question of liability is tied to an alleged class-wide policy or practice of the employer.  It also clarifies that the U.S. Supreme Court holding in Dukes is no impediment to certification in such a case.