Fifth Circuit overrules NLRB’s invalidation of class-action waivers

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In D.R. Horton, Inc. v NLRB, the US Court of Appeals for the Fifth Circuit overturned a controversial National Labor Relations Board (NLRB) decision regarding class- and collective-action waivers, and in doing so strengthened the right of employers to require that employees resolve employment disputes through binding individual arbitration rather than through class or collective actions. The court, however, upheld a limit on this right, which employers must keep in mind as they update their dispute resolution policies.

Early last year, in D.R. Horton, Inc, the NLRB declared it unlawful for D.R. Horton to require its employees, as a condition of employment, to sign an arbitration agreement that waived the right to bring class or collective actions — in both arbitral and judicial forums — against D.R. Horton regarding the terms and conditions of their employment. The board reasoned that filing a class or collective action on behalf of employees is activity protected by section 7 of the National Labor Relations Act (NLRA), which gives non-supervisory employees — even those who are not unionised — the right to engage in ‘concerted activities for the purpose of… mutual aid or protection.’

Therefore, the board found that precluding employees from bringing such actions violates the Act. D.R. Horton petitioned the Fifth Circuit to review the decision, arguing that the board’s analysis ignored the Supreme Court’s numerous recent cases favouring the broad reach of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (FAA). See, for example, AT&T Mobility v Concepcion. The board argued, however, that its decision was a defensible interpretation of the NLRA and did not conflict with the FAA…

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