Despite criticism from some United States Courts of Appeals, the National Labor Relations Board (“NLRB”) has reasserted its position in D.R. Horton in which it held that class-action lawsuits are protected under the National Labor Relations Act (“NLRA”). Murphy Oil USA, Inc., 361 NLRB No. 72 (Oct. 28, 2014).
In its 2012 D.R. Horton Inc., 357 NLRB No. 184 (Jan. 3, 2012) decision, the NLRB held that requiring employees to sign arbitration agreements that prevented them from participating in class or collective action lawsuits against employers was a violation of the employees’ right to engage in the concerted protected activity guaranteed under the NLRA. Subsequently, an overwhelming majority of the federal district and appellate court decisions to have considered the issue rejected and criticized D.R. Horton. A panel of the Fifth Circuit Court of Appeals previously denied enforcement of D.R. Horton, Inc., disagreeing with the NLRB’s interpretation of the NLRA and concluded that class and collective action waivers in employer arbitration agreements do not violate the NLRA and are enforceable under the Federal Arbitration Act as long as employees maintain the right to bring suit as individuals. Subsequently, the Fifth Circuit denied the NLRB’s Petition for Rehearing En Banc. The NLRB never sought Supreme Court review of the Fifth Circuit’s adverse decision.
In Murphy Oil, Inc., the Company’s binding arbitration agreement was provided to employee Sheila Hobson as a condition of employment when she was hired. Nevertheless, Hobson later filed a collective action alleging violations of the Fair Labor Standards Act in federal district court in the Northern District of Alabama. The Company filed a motion to compel arbitration, seeking to force Hobson and three other employees to arbitrate their claims on an individual basis. Hobson then filed an unfair labor practice charge with the NLRB, claiming that the arbitration agreement violated Section 7 of the NLRA by prohibiting employees from litigating their employment related claims concertedly. The NLRB’s General Counsel agreed with Hobson and issued an unfair labor practice complaint against the Company.
The District Court granted the Company’s motion to compel individual arbitration. However, while the District Court action was stayed pending arbitration, the NLRB issued its decision which declared unlawful the class and collective action waiver clause from the Company’s arbitration agreement, and directed that it be removed from Company policies. Adhering to its reasoning in D.R. Horton, the Board in Murphy Oil rejected subsequent judicial criticism of that decision. On November 6, 2014, Murphy Oil filed a Petition for Review with the Fifth Circuit – the same court that previously overturned the Board in D.R. Horton.
Employers who have implemented class or collective waivers in employee arbitration agreements should review those agreements with counsel to determine whether any modification is recommended in light of the Board’s Murphy Oil ruling pending any further developments.