Originally published by Robert L. Arrington.
In the case of D.R. Horton, Inc., 357 N.L.R.B. 184 (2012), the NLRB held that the adoption of a mandatory arbitration plan for employees containing a class and collective action waiver was unlawful because such provisions are an unfair labor practice under Section 7 of the National Labor Relations Act (“NLRA”), which protects the right of employees to act in concert.
D.R. Horton petitioned for review of this ruling by the United States Court of Appeals for the Fifth Circuit, which overturned the Board in 2013. D.R. Horton, Inc. v. National Labor Relations Board, 737 F.3d 344 (5th Cir. 2013). The Court held the FAA and the Supreme Court’s decisions interpreting it prevailed because the NLRA was not intended to repeal the application of the FAA by implication.
The NLRB did not accept the Fifth Circuit’s decision. It struck down a similar dispute resolution plan in Murphy Oil USA, Inc. and Sheila M. Hobson. Case 10–CA–038804 (October 28, 2014). Murphy Oil asked the Fifth Circuit to review the ruling, and the Board petitioned for hearing en banc, hoping to change the Court’s mind. But the Fifth Circuit did not budge. It granted the petition for review, denied the en banc hearing, and overturned the Board’s decision. Murphy Oil USA, Inc. v. National Labor Relations Board, No. 14-60800 2015 WL 6457613 (2015).
But the NLRB did not going away quietly. While the Second and Eighth Circuits have joined the Fifth in declining to follow the Board’s ruling in D.R. Horton (Sutherland v. Ernst & Young, LLP, 726 F.3d 290, 297 n. 8 (2d Cir. 2013) and Owen Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013.) ), the Seventh and Ninth Circuits have sided with the Board. See, Lewis v. Eric Systems Corp., 823 F.3rd 1147 (7th Cir. 2016), Morris v. Ernst & Young US, 2016 WL 443308 (9th Cir. 2016).
The issue will likely ultimately reach the Supreme Court. Indeed, the Board is planning on it, recently conceding in yet another 5th Circuit case that the court’s rulings in D.R. Horton and Murphy Oil required reversal of its ruling, and stating it simply wanted to preserve the issue for possible Supreme Court or en banc review. Citigroup Technology, Inc., et al. v. National Labor Relations Board, No. 15-60856 (5th Cir. December 8, 2016).
Sometime in 2017, a new Justice will join the Supreme Court. Whoever Donald Trump appoints to replace the late Antonin Scalia, that person is likely to be far different from whoever would have been appointed by Hillary Clinton. Predicting the Court is risky business, but part of the fallout from the presidential election may be a Court less inclined to adopt the Board’s view of this issue.
Moreover, there will be a new NLRB in 2017, as a result of the change in administrations, which will likely be more kindly disposed toward waivers than the current board.
But those decisions are in the future. In the meantime, employers who use arbitration clauses with class and collective action waivers shouldn’t panic and eliminate them. Those employers who don’t use such clauses but are considering it might want to put their plans on hold until the speculation becomes reality.
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