A National Labor Relations Board (NLRB) judge has determined that Sprouts Farmers Market violated federal labor law by requiring employees to sign mutual binding arbitration agreements (MAAs) that preclude class or collective-action claims in arbitration or otherwise as a condition of hiring and continued employment. SF Mkts, LLC d/b/a Sprouts Farmers Mkt., Nos. 21-CA- 099065, -104677 (NLRB Div. of Judges, Atlanta Branch Ofc., decided February 18, 2014).

The issue arose from two cases: in the first, Jana Mestanek filed wage-and- hour claims against the employer in court, and it sought to compel arbitration under the MAA to which she had agreed; in the second, Laura Christensen  was fired for refusing to sign an acknowledgement of an employee handbook supplement agreeing to the terms of a revised MAA.

At issue was whether D.R. Horton, Inc. (Horton), 357 NLRB No. 184 (2012), enfd. in part, denied in part, 737 F.3d 344 (5th Cir. 2013), remains good law and should be applied. In Horton, the NLRB held that “an employer violates Section 8(a)(1) of the [National Labor Relations] Act [NLRA] by ‘requiring employees to waive their right to collectively pursue employment-related claims in all forums, arbitral and judicial,’ because ‘The right to engage in collective action—including collective legal action—is the core substantive right protected by the NLRA and is the foundation on which the Act and Federal labor policy rest.’”The Fifth Circuit denied enforcement of the NLRB’s order invalidating the MAA at issue in that case, finding it in conflict with the Federal Arbitration Act.

Here, the NLRB judge explained that he was “constrained to follow Board prec- edent that has not been reversed by the Supreme Court or by the Board itself,” and that “the Board generally applies a ‘nonacquiescence policy’ to appellate decisions that conflict with Board law,” further explaining that the board “is  not required, on either legal or pragmatic grounds, to automatically follow an adverse court decision but will instead respectfully regard such ruling solely as the law of that particular case.” Because the U.S. Supreme Court has not specifically addressed the “issue of mandatory arbitration provisions that cover class and/or collective actions vis-à-vis the [NLRA], it follows that the Court has not overruled Horton, which remains controlling law.”

Under Horton, the judge determined that the employer had violated the NLRA and ordered reinstatement, back pay, the costs of litigation, and rescission of the MAA. So ruling, the judge did not address, but acknowledged, the employer’s argument that the complaint was barred, in whole or in part, because “(a) the Board lacked a quorum at the time it issued its decision in Horton; (b) the consolidated complaint was issued on the authority of a regional director appointed to that position by a Board that lacked a quorum at the time of her appointment; and/or (c) the complaint was issued pursuant to a delegation of authority from the Acting General Counsel who was appointed to that position in violation of the Vacancies Reform Act, 5 U.S.C. § 3345 et seq., and who therefore lacked authority to so delegate.”