The law concerning class action waivers continues to develop at a rapid pace. While most courts are now enforcing class action waivers in arbitration agreements, there remains at least one prominent area of uncertainty for employers thinking about implementing a class action waiver: the position of the National Labor Relations Board (NLRB). In early 2012, the NLRB, in D.R. Horton, 357 N.L.R.B. No. 184 (2012), held that an arbitration agreement between D.R. Horton and its employees precluding class and collective actions violated the National Labor Relations Act (NLRA). The NLRB reasoned that the pursuit of class or collective actions is concerted activity protected by the NLRA, and that any arbitration agreement that precludes employees from being involved in class or collective actions is therefore an unfair labor practice.
D.R. Horton appealed the NLRB's decision to the U.S. Court of Appeals for the Fifth Circuit. The Fifth Circuit disagreed with the NLRB, finding that the NLRB failed to give proper weight to the policy of the Federal Arbitration Act (FAA), which favors arbitration agreements. The Court also concluded that nothing in the text of the NLRA, its legislative history or its purpose contains a congressional command to override the FAA. Accordingly, the Fifth Circuit held that the waiver in D.R. Horton's arbitration agreement must be enforced. The decision was not all bad news for the NLRB — the Court agreed with the NLRB that the arbitration agreement as a whole could be construed as prohibiting the filing of unfair labor practice charges and therefore should be amended.
The NLRB had until July 15, 2014, to seek review of the Fifth Circuit's decision by filing a petition for certiorari with the U.S. Supreme Court, but declined to do so. Why? The NLRB has not made any public statement about its decision, but it is unlikely that the NLRB has changed its position and now accepts the reasoning of the Fifth Circuit. It is more likely that the NLRB made a strategic decision to not seek review by the Supreme Court so that it could continue to apply its reasoning outside of the Fifth Circuit, hoping to get a different decision from a different Court of Appeals. The NLRB may have concluded that it will have a better chance before the Supreme Court if there was a split in how Circuit Courts of Appeals decide the issue, or if new Supreme Court Justices are appointed that may be more favorably inclined toward an expansive interpretation of the Act. By foregoing an appeal, the NLRB also has the ability go back to the drawing board and recraft the legal arguments supporting its interpretation in a way that might survive judicial scrutiny. Whatever the reasoning, it is safe to presume that this NLRB will not change its stance on class or collective action waivers in matters outside of the Fifth Circuit until the Supreme Court rejects its expansive interpretation of the contours of protected concerted activity under the NLRA.
Notably, the NLRB's position has not gained significant traction within the courts. To the contrary, most courts that have considered the NLRB's position have rejected it. But those decisions may be of little use to employers in proceedings before the NLRB.
By choosing to neither take the issue to the Supreme Court nor state its acceptance of the reasoning of the Fifth Circuit's reasoning, the NLRB has chosen to permit continued uncertainty that may discourage employers from using class or collective waivers until more courts decide the issue. This issue seems destined to be decided by the Supreme Court at some time in the not too distant future.