On August 7, 2017, a Fifth Circuit panel ruled, in a divided decision, that a class-action waiver can be enforceable even without an arbitration agreement being involved. In that case, the Convergys Corporation required its applicants to sign a class-action waiver even though it was not contained in an arbitration agreement. The Convergys Corp. v. National Labor Relations Board (NLRB) ruling rejected a NLRB decision holding that the company cannot require its job applicants to sign class action waivers that prevent them from suing the company.

The NLRB maintains that Section 7 of the National Labor Relations Act (NLRA) guarantees a substantive right to participate in class and collective actions and has consistently shot down the use of class action waivers. There is currently a circuit split (discussed in our prior posts here and here) on whether such class action waivers in arbitration agreements are enforceable, with the Second, Fifth and Eighth Circuits rejecting the NLRB’s position, and the Sixth, Seventh, and Ninth Circuits embracing it. In 2013, in D.R. Horton v. NLRB, the Fifth Circuit held that such waivers in arbitration agreements are valid.

The U.S. Supreme Court is set to settle the circuit split because the Court granted certiorari in three cases involving class action waivers in employment agreements—Murphy Oil USA, Inc. v. NLRB, Lewis v. Epic Systems Corp., and Morris v. Ernst & Young—and a hearing is set for October on the consolidated cases (discussed in our prior post here). The Solicitor General gave the NLRB permission to represent itself before the Supreme Court. In the NLRB’s Murphy Oil brief, it argues that there is no need to reconcile the Federal Arbitration Act (“FAA”) and the NLRA because the Supreme Court “has never enforced an arbitration agreement that violates another federal statute, as the agreements here violate the NLRA by imposing prospective waivers of concerted activities.”

However, the Convergys case is unique from the cases before the Supreme Court because there was no arbitration agreement. The Convergys court had to decide whether Section 7 of the NLRA, which guarantees the right to self-organize and collective bargain and “to engage in other concerted activities for the purpose of … other mutual aid or protection,” also contemplates an employees’ right to participate in class actions. The court held that Section 7 does not include a right to participate in class and collective actions. Rejecting the NLRB’s argument that this case was distinguishable from D.R. Horton because D.R. Horton involved an arbitration agreement and, thus, was shielded by the FAA, the court stated that D.R. Horton established that the use of a class or collective action is not a substantive right.

Two days later, the Fifth Circuit panel reached the same conclusion in Logisticare Solutions v. NLRB, a case also involving a class action waiver outside of an arbitration agreement. Moreover, the Logisticare court rejected the NLRB’s argument that the waiver violated Section 8(a)(1) of the NLRA because a reasonable employee could construe the waiver as prohibiting board charges.

The Convergys and Logisticare decisions are major wins for employers. But employers should watch for the U.S. Supreme Court’s upcoming decision on class action waivers before getting too comfortable.