CHA News Article

Court Reverses NLRB Ruling Hostile to Class Action Waivers in Arbitration Agreements

The U.S. Court of Appeals for the Fifth Circuit recently invalidated the controversial D.R. Horton, Inc. decision issued by the National Labor Relations Board (NLRB) last year. The NLRB’s decision concluded that an arbitration agreement requiring employees to waive their right to maintain joint, class, or collective employment-related actions violates Section 8(a)(1) of the National Labor Relations Act (NLRA). The Fifth Circuit rejected that conclusion, following the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (2011). Although the Fifth Circuit’s decision is not binding in California, it is nonetheless good news for California employers.

In August, the Ninth Circuit Court of Appeals, covering California, issued a decision in Richards v. Ernst & Young, LLP, in which the court suggested the NLRB may have overstepped its jurisdiction, but did not rule directly on the issue. Therefore, the two decisions taken together support the conclusion that employers have the option of avoiding class action litigation through arbitration agreements. Given the proliferation of class action litigation in California, hospital employers may want to evaluate whether employment arbitration agreements would be beneficial.

Any analysis and drafting of arbitration agreements should be conducted in conjunction with counsel. The law in this area continues to develop. Moreover, the Fifth Circuit found that, while the class action waiver in D.R. Horton’s arbitration agreement was enforceable, other aspects of the arbitration agreement violated the Sections 8(a)(1) and (4) of the National Labor Relations Act because it included language that could lead employees to reasonably believe that they were precluded from filing unfair labor practice charges.