The U.S. Court of Appeals for the Fifth Circuit decided two cases considering the impact of the National Labor Relations Act (NLRA) on class or collective action waivers required by companies for their applicants and employees.
The first decision, in Convergys Corporation v. NLRB, No. 15-60860 (5th Cir. Aug. 7, 2017), addressed whether the company violated the NLRA by having applicants and employees sign stand-alone class and collective action waivers and then taking steps to enforce the waivers. Circuit Judge Jennifer Walker Elrod, writing for the majority, found that Convergys did not violate Section 7 of the NLRA by requiring execution of the waivers and did not violate the NLRA in enforcing the waivers.
Notably, Judge Elrod explained that the court had “already rejected the Board’s position that Section 7 guarantees a right to participate in class or collective actions, holding that the use of a class or collective action is a procedure rather than a substantive right.”
The National Labor Relations Board (NLRB) had argued that the decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), was restricted to waivers in arbitration agreements. But the Convergys majority disagreed because D.R. Horton “was not limited to interpretation and application of the [Federal Arbitration Act (FAA)].” And, the Court found the Board’s citation of Killion v. KeHE Distrib., LLC, 761 F.3d 574 (6th Cir. 2014), unpersuasive because it was decided by the Sixth Circuit, “interprets the [Fair Labor Standards Act (FLSA)] rather than the NLRA, holds contrary to the Fifth Circuit precedent that the FLSA’s provisions for class actions convey a right that cannot be waived, declines to decide whether a different rule should apply in the context of arbitration agreements and relies on a framework for evaluating waivers that is not supported by the reasoning of [D.R.] Horton and its progeny.”
The panel concluded that giving up the right to participate in class and collective actions was not surrendering a Section 7 right and therefore did not amount to an unfair labor practice under Section 8(a)(1).
Judge Stephen A. Higginson concurred in the judgment only because he was “[c]onstrained by [the Court’s] precedent.” On the other hand, Circuit Judge Patrick E. Higginbotham dissented, in part, because of the absence of an arbitration agreement. He declared:
Although this Court has held time and again that such waivers are permissible, one important distinction makes the waiver in this case different: there is no arbitration agreement. Without being contained in an arbitration agreement and thus shielded by the protective force of the [FAA], a bare class and collective action waiver violates Section 8(a)(1).” (Citations eliminated.)
Two days later, the Fifth Circuit revisited similar issues in LogistiCare Solutions, Inc. v. NLRB, No. 16-60029 (5th Cir. Aug. 9, 2017). There, LogistiCare Solutions compelled its employees and applicants to waive their rights to be a representative or member of a collective or class action. The waiver stated in pertinent part:
I hereby acknowledge and understand that as a condition of my employment:  I am waiving my right to have a trial by jury to resolve any lawsuit related to my application or employment with the Company;  I am waiving my right to participate as a member of a Class or Collective action lawsuit and/or serve as a class representative of similarly situated employees in any lawsuit against the company.
The administrative law judge (ALJ) and a three-member panel of the NLRB found that the waiver violated Section 8(a)(1) of the NLRA. In reaching that conclusion, the NLRB distinguished the Fifth Circuit’s decisions in D.R. Horton and in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), because the waivers in those cases were in arbitration agreements covered by the FAA. (Interestingly, while the NLRB also alleged that the jury-trial waiver violated the NLRA, the ALJ rejected the argument and that decision was affirmed.)
Circuit Judge Elrod, writing for the Fifth Circuit panel, concluded based on applicable precedent that the class and collective action waiver does not violate Section 8(a)(1) of the NLRA and could not be “reasonably understood” to do so.
The Court found that it addressed the “explicit” Section 8(a)(1) violation issue in Convergys Corporation and that its binding decision in D.R. Horton that Section 7 does not create a substantive right to pursue class or collective actions defeated the Board’s argument of an explicit Section 8(a)(1) violation.
Because the Board also found that the waiver independently violated Section 8(a)(1) since employees could reasonably interpret the waiver to prevent them from filing charges with the NLRB, the Court also explored and rejected that holding. In the end, the Court found none of the Board’s rationales “convincing”. Hence, the court granted the petition for review and denied the Board’s cross-petition for enforcement.
Circuit Judge Higginbotham concurred in the decision. He dissented from the majority opinion because he would hold “that a bare class and collective action waiver outside of an arbitration agreement violates the [NLRA].” Yet he agreed with the majority that employees “could not reasonably interpret it to restrict their right to bring charges with the Board.”
Finally, Circuit Judge Higginson also concurred and dissented. He would have upheld the Board’s interpretation of the waiver as restricting access to the Board. But, he agreed with the majority that the Convergys Corporation decision precluded the Board’s alternative argument that the waiver violated Section 8(a)(1) by requiring employees to waive the right to be involved in aggregate proceedings. He viewed that argument as contrary to the Court’s D.R. Horton precedent.
The two Fifth Circuit opinions underscore an emerging issue – the enforceability of class or collective action waivers outside of the arbitration context. And this issue is unlikely to be addressed in the three consolidated class waiver cases with arbitration agreements pending before the U.S. Supreme Court.