In Cellular Sales of Missouri LLC, an NLRB administrative law judge (“ALJ”) invalidated a class action waiver because of the NLRB’s prior D.R. Horton decision, which held that employers cannot require employees to waive their right to engage in class or collective actions as a condition of employment.
The Cellular Sales NLRB decision was preceded by the filing of a class action lawsuit in November 2012 in the United States District Court for the Western District of Missouri. Plaintiff John Bauer filed the lawsuit on behalf of himself and all other similarly situated current and former sales professionals of Cellular Sales of Missouri, LLC and Cellular Sales of Knoxville, Inc. Bauer alleged that the companies violated the Fair Labor Standards Act and the Kansas Wage Payment Law by failing to pay their sales professionals minimum wage and overtime pay.
The companies filed a motion to stay the litigation and compel arbitration pursuant to the terms of the arbitration agreement that Bauer and other sales professionals signed as a condition of their employment. The arbitration agreement provided that all employment-related claims must be resolved through binding individual arbitration. The agreement specifically prohibited class or collective arbitrations.
While the lawsuit was pending, Bauer filed a charge with the NLRB, alleging that the arbitration agreement violates Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by interfering with employees’ right to engage in protected concerted activity. The NLRB issued a complaint based on Bauer’s charge, which went to a hearing before an ALJ. Relying on the D.R. Horton decision, the ALJ concluded that the arbitration agreement violated Section 8(a)(1) by requiring employees to waive their right to engage in collective or class actions or arbitrations.
Since the D.R. Horton decision in January 2012, the NLRB has invalidated numerous arbitration agreements that contained class action waivers. We previously posted about several of these recent NLRB decisions. The companies argued that the Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant rendered D.R. Horton invalid, but the ALJ rejected that argument, finding American Express distinguishable since it did not specifically address employees’ rights under the NLRA.
Unless and until the D.R. Horton decision is overturned on appeal, employers who maintain mandatory arbitration policies may want to review their arbitration agreements to ensure that they do not prevent employees from exercising their right to engage concerted activity protected by Section 7 of the NLRA.