BREAKING: NLRB Declares Class Waivers In Arbitration Agreements Unlawful

On January 3, the National Labor Relations Board issued a decision finding an employer’s mandatory arbitration program that barred class or collective actions violates federal labor law in that it interferes with employees’ rights to engage in concerted activity.  The case is D.R. Horton, Inc. and Michael Cuda.  In their decision, Chairman Mark Gaston Pearce and Member Craig Becker found the program unlawful because it both prohibited class arbitration and class actions in court.  The Board noted that agreements prohibiting class arbitration were not per se unlawful, so long as class or collective relief remained available in a judicial forum.  Because the agreement at issue in Cuda allowed neither, it was held to be unlawful.  Member Brian Hayes was recused from the case.

This decision is especially interesting in light of the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion which recognized the validity of class action waivers in arbitration agreements.  Concepcion, it should be noted, was not an employment case so federal labor law was not involved. 

Prior to issuing its decision, the Board took comments from 260 interested parties.  It is likely that the decision will be challenged in the courts.  Employers, especially those with mandatory arbitration agreements or those who are considering implementing such a program, should stay tuned for further developments on this controversial topic.

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