On Jan. 6, the National Labor Relations Board (NLRB) published a decision, D.R. Horton, Inc. v. Cuda, in which it determined that employers covered by the National Labor Relations Act (NLRA) cannot, as a condition of employment, require employees to sign agreements waiving their right to file joint, class or collective claims. Because they prohibit employees from engaging in concerted activity protected by the NLRA, the NLRB determined that these agreements consitute an unfair labor practice when the waiver applies to claims regarding wages, hours or other conditions of employment. Further, a violation of the NLRA exists regardless of whether the agreement prohibits such claims in arbitration or court.

In this case, the employer, D.R. Horton, required all employees to agree to the following:

• That all disputes and claims relating to the employee’s employment with D.R. Horton will be determined exclusively by final and binding arbitration.
• That the arbitrator only has authority to hear the employee’s individual claims, cannot consolidate the claims of other employees and cannot process claims as class or collective actions or award relief to a group or class of employees in one arbitration proceeding.
• That the employee waives his right to file suit against D.R. Horton relating to his employment and waives the right to resolve employment claims before a judge or jury.

Based on the agreement, the NLRB concluded that employees could only pursue employment claims through individual arbitration. In short, the NLRB believes that federal labor policy, as embodied in the NLRA, trumps federal policy recognizing the enforceability of arbitration agreements, as embodied in the Federal Arbitration Act (FAA). Given the NLRB’s current political leanings, the NLRB’s D.R. Horton decision should come as no surprise. (NOTE: Member Brian Hayes recused himself from this case, but the NLRB has taken the position that it still had a quorum to issue the decision. The decision, although not published until Jan. 6 was signed on Jan. 3 — the last day the NLRB still had three members. For more on the quorum requirement, see our Dec. 2 and Nov. 29 posts.)

What is surprising is the NLRB’s seeming indifference to recent U.S. Supreme Court rulings. In 14 Penn Plaza LLC v. Pyett, the Supreme Court held that employers can require employees, as a condition of employment, to agree to arbitrate statutory claims, such as discrimination claims made under Title VII. In AT&T Mobility LLC v. Concepcion, the Supreme Court held that companies can require consumers to arbitrate statutory claims and waive their right to have such claims heard in a class action arbitration. Many commentators believe that the combination of 14 Penn Plaza and AT&T Mobility paved the way for employers to eliminate the threat of employment-related class or collective action cases.

Despite the NLRB’s insistence that Supreme Court precedent supports the outcome of D.R. Horton, the Supreme Court’s Jan. 10 decision in CompuCredit Corp. v. Greenwood, severely undercuts the NLRB’s rationale. In CompuCredit, the plaintiffs claimed that the Credit Repair Organizations Act (CROA) prohibited arbitration of CROA claims because the CROA prohibits the waiver of rights granted by the CROA, one of which is the “right to sue.” The Court rejected that argument, holding instead that, because the CROA is silent on whether claims under the CROA can proceed in an arbitration forum, the FAA requires that the arbitration agreement be enforced according to its terms.

Likewise, the NLRA is silent on whether claims under the NLRA can proceed in arbitration. Thus, it appears that the Supreme Court would disagree with the NLRB’s decision in D.R. Horton and would enforce the arbitration agreement according to its terms.

Unlike the uncertainty currently surrounding the NLRB’s membership, the D.R. Horton decision, if unchallenged, will certainly change the employment landscape by deterring the use of class action waivers as a condition of employment. Note, however, that the NLRB’s decision did not address voluntary waivers, i.e., waivers not required as a condition of employment.

To follow additional developments regarding D.R. Horton, stay tuned . . .