In its 2012 D.R. Horton decision, the NLRB took the position that arbitration agreements with class and collective action waivers that are required as a condition of employment violate the National Labor Relations Act and are unenforceable. Although the Board’s decision was rejected by numerous federal courts, the NLRB recently indicated it will not budge from its position.
In Murphy Oil USA, Inc., 361 NLRB No. 72 (Oct. 28, 2014), the employer required that all employees sign an arbitration agreement that included a waiver of the employee’s right to commence a class or collective action claim relating to employment issues in arbitration or any other forum.
In June 2010, four Murphy Oil employees filed a collective action in federal court alleging violations of the FLSA. Murphy Oil moved to dismiss the claim in its entirety and to compel the employees to arbitrate their claims on an individual basis. The employees responded by filing an unfair labor practice charge alleging that Murphy Oil’s mandatory arbitration agreement’s class action waiver consisted an infringement on their rights to engage in protected concerted activity in violation of the National Labor Relations Act (NLRA).
The district court granted Murphy Oil’s motion to compel individual arbitration and stayed the court proceedings pending arbitration. In light of the court’s decision to enforce the agreement, Murphy Oil asked the NLRB to overturn its ruling in D.R. Horton, which had been rejected by the Fifth Circuit last year and other federal courts considering the issue.
The Board refused, holding that the right to engage in collective action under the NLRA includes the right to engage in collective legal action. Therefore, according to the NLRB, Murphy Oil’s arbitration agreement was unenforceable, notwithstanding the court’s decision.
Two members of the Board issued strong dissents, including one that noted: “…with this decision, the majority effectively ignores the opinions of nearly 40 Federal and State courts that, directly or indirectly, all recognize the flaws in the Board’s … reading of the National Labor Relations Act in order to both override the Federal Arbitration Act and ignore the commands of other federal statutes. Instead, the majority chooses to double down on a mistake that, by now, is blatantly apparent.”
Given the strong disagreement among NLRB members and between the NLRB and numerous federal courts, this area is far from clear and employers may face significant hurdles to enforcing mandatory arbitration agreements with class and collective action waivers. Employers would be wise to have legal counsel review mandatory arbitration agreements to ensure that they include important safeguards in the event a class or collective action waiver is found unenforceable.