In a victory for employers, the Fifth Circuit rejected the National Labor Relations Board’s ruling that mandatory arbitration agreements that contain class or collective action waivers violate the National Labor Relations Act (NLRA).
By way of background, in D.R. Horton, 357 NLRB 184 (2012), the NLRB ruled that arbitration agreements with class action waivers violate the act because they preclude workers from “joining together” to improve working conditions, a substantive right accorded to workers by the NLRA.
On December 3, 2013, the Fifth Circuit rejected the NLRB’s rationale in D.R. Horton and held that employees may waive the right to pursue claims against their employer on a class or collective basis. The court held that the NLRA did not expressly preclude such waivers and that the Federal Arbitration Act mandated enforcement of lawful arbitration agreements, even if such agreements required employees to surrender their ability to bring a claim on a class or collective basis.
In light of the Fifth Circuit’s decision, employers that have not incorporated class action waivers into their employment documents should consider doing so. Properly drafted and executed waivers may limit employers’ exposure to multimillion-dollar class action claims by employees, such as wage and hour or discrimination.