NLRB Prohibits Arbitration Agreements Regarding Class Actions
The National Labor Relations Board has issued a ruling addressing employment agreements with arbitration provisions. The agreement in this decision prevented an employee from filing a class action. See NLRB decision. The case concerned an agreement used by the homebuilder, D.R. Horton which provided that employees had to bring employment claims to an individual arbitrator. The employee could not file their claim as part of a class action. The agreement prevented an employee from fling suit in court as part of a group or class action.
The NLRB enforces the National Labor Relations Act, the 1930's era statute that protects workers who form unions. The NLRA also allows workers to discuss terms and conditions of their job - whether they have a union or not. This provision of the NLRA allows employees to engage in "concerted activity," meaning group activity regarding their jobs. The Board found that the D.R. Horton agreement infringed on concerted activity. The ruling does not require class arbitrations. But, it does find that no agreement may foreclose the possibility of groups of employees seeking remedies in a judicial forum.
For many years, federal courts have been trending toward affirming employment agreements requiring arbitration of claims. This D.R. Horton decision is a rare setback for that trend.
The NLRB is composed of members appointed by the President. Consequently, it is not unusual for decisions to be changed dramatically when a new administration takes over. When the administration changes, this decision may well change.
