On December 3, 2013, the Fifth Circuit Court of Appeals decided D.R. Horton v. the National Labor Relations Board. In Horton, the court overturned the National Labor Relations Board’s ruling that employers cannot enforce class action waivers in arbitration agreements. The Fifth Circuit found that the NLRB had not given proper weight to the Federal Arbitration Act (FAA), which provides that arbitration agreements must be enforced according to their terms. The U.S. Supreme Court held similarly in the consumer class action context in 2011, ruling in AT&T Mobility v. Concepcion that class action waivers in arbitration agreements are enforceable under the FAA.
Although the Horton decision, at first glance, might not appear to have an impact on ERISA claims, it is further evidence of a clear trend: courts are enforcing class action waivers in arbitration agreements. A class action is a procedural device, not a substantive right. Therefore, barring any specific right to bring class action claims (there is no such right in ERISA), class action waivers in arbitration agreements are likely to be enforced.
In the wake of Horton, what should employers do? If a plan sponsor wants its ERISA claims to be arbitrated, it should make sure that mandatory arbitration language is present in all relevant plan documents, summary plan descriptions, and employment agreements. Explicit class action waiver language should be included, which should reference the FAA. Importantly, the Department of Labor requires that arbitration provisions meet certain requirements to be enforceable, so be sure to consult your ERISA counsel in drafting these provisions.
If you would like additional information or have questions and/or comments regarding this Benefits Blast, please do not hesitate to contact me or another member of the Winston team.