The National Labor Relations Board erred in determining that a company violated the National Labor Relations Act by maintaining and enforcing a mandatory arbitration agreement which prohibited employees from bringing or participating in class or collective actions to redress employment-related disputes in any forum, the U.S. Court of Appeals for the Eighth Circuit, in St. Louis, has held. Cellular Sales of Missouri, LLC v. NLRB, No. 15-1620 (June 2, 2016).  (The Court agreed with the Board that the company’s employees would reasonably understand the arbitration agreement to waive or impede their rights to file unfair labor practice charges with the Board, in violation of the NLRA.)

The Eighth Circuit has jurisdiction over Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

This decision was released just days following the Seventh Circuit’s holding to the contrary in Lewis v. Epic Systems and underscores that the issue is ripe for U.S. Supreme Court review. For more on Lewis, see our article, Supreme Court Review Likely After Seventh Circuit Creates Split on Class and Collective Action Waivers under NLRA.

Background

John Bauer, formerly an independent contractor for Cellular Sales of Missouri, LLC, was hired by the company as an employee in January 2012. As a condition of his employment, Bauer entered into an employment agreement that included a provision under which he agreed to arbitrate individually “[a]ll claims, disputes, or controversies” related to his employment and to waive any class or collective proceeding.

After he was terminated from Cellular Sales Bauer filed an unfair labor practice charge with the National Labor Relations Board, claiming that Cellular Sales violated his right to engage in protected concerted activity of the NLRA when it required him to sign an arbitration agreement that included a class-action waiver.

The Board issued a complaint, and an administrative law judge (ALJ), relying on the NLRB’s D.R. Horton, Inc., 357 N.L.R.B. No. 184 (Jan. 3, 2012), ruled in favor of the Board, concluding that Cellular Sales’s arbitration agreement violated the NLRA because of its individual arbitration requirement and because employees would reasonably interpret the arbitration agreement as barring or restricting their rights to file unfair labor practice charges with the Board. The ALJ also concluded that Cellular Sales had violated the NLRA by moving to dismiss Bauer’s putative class-action lawsuit and compel enforcement of the arbitration agreement. The Board affirmed and adopted the ALJ’s rulings and findings.

Eighth Circuit Decision

The Eighth Circuit held that employment arbitration agreements may bar class and collective actions.

The Court previously had rejected the NLRB’s decision in D.R. Horton. In D.R. Horton, the Board concluded that arbitration agreements that barred all forms of employee class actions, which the Board deemed to be protected concerted activity, violated the NLRA. The Court, in a case that was not on review from a Board decision, found the agreement did not preclude an employee from filing a complaint with an administrative agency, which then could file suit on behalf of a class of employees. Owen v. Bristol Care, Inc., 702 F.3d 1050, 1053-55 (8th Cir. 2013). Moreover, even if D.R. Horton did apply, the Eighth Circuit noted it does not owe deference to the NLRB’s D.R. Horton.

The Eighth Circuit granted the employer’s petition for review and denied enforcement of the Board’s order on this issue.