California Labor and Employment Defense Blog

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.
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