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Tuesday, December 10, 2013

D.R. Horton v. NLRB: Fifth Circuit Overturns Ruling on NLRA Preemption of Class Action Waivers

A little more information on the Fifth Circuit's decision in D.R. Horton, Inc. v. NLRB, ___ F.3d ___ (5th Cir. 12/3/13).

In In re DR Horton, Inc., 357 NLRB 184 - 2012 (discussed here), the National Labor Relations Board (Board or NLRB) held that an employer violated section 8 of the National Labor Relations Act (NLRA) by requiring its employees to sign an arbitration policy. Horton appealed the decision to the Fifth Circuit Court of Appeals, which overturned the Board's decision.

After discussing a number of procedural and jurisdictional issues, the Court got to the heart of the analysis. The Court began with the premise that the Federal Arbitration Act (FAA) requires courts to enforce arbitration agreements according to their terms, then noted two exceptions to the rule: (1) an arbitration agreement may be invalidated on any ground that would invalidate a contract under the FAA’s “saving clause,” or (2) application of the FAA may be precluded by another statute’s contrary congressional command.

The Court held that under Concepcion, the Board’s rule "does not fit within the FAA’s saving clause." Slip op. at 19. "While the Board's interpretation [invalidating class action waivers] is facially neutral 
– requiring only that employees have access to collective procedures in an arbitral or judicial forum – the effect of this interpretation is to disfavor arbitration." Slip op. at 20. 

The Court then held that neither the text of the NLRA nor its 
legislative history evidences a "congressional command to override the FAA." Slip op. at 22. 

Finally, the Court affirmed the Board's holding that the arbitration language at issue violated the NLRA because it would lead employees to a reasonable belief that they were prohibited from filing unfair labor practice charges with the Board. Slip op. at 26-28.  

According to the Court, every Circuit Court of Appeals to consider D.R. Horton "has either suggested or expressly stated that [it] would not defer to the NLRB’s rationale, and held arbitration agreements containing class waivers enforceable." See Richards v. Ernst & Young, LLP, – F.3d — , No. 11-17530, 2013 WL 4437601, at *2 (9th Cir. Aug. 21, 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297-98 n.8 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013). 

The Fifth Circuit's opinion is available here

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