The NLRB Strikes a Blow in Support of Class Actions

On January 3, 2012, the National Labor Relations Board (“NLRB”) ruled that an employer cannot prohibit its employees from vindicating their rights through a class action. D.R. Horton, 357 NLRB No. 184 (2012).

Employer D.R. Horton required that its employees enter into an arbitration agreement as a condition of employment. The agreement not only mandated that employees resolve their disputes with their employer through the arbitration process, but that they do so on an individual basis, directly banishing class actions of any kind or nature, with one swoop of the pen.

An employee of D.R. Horton claimed that D.R. misclassified its employees as exempt under the Fair Labor Standards Act (“FLSA”) and sought to right this wrong through a class action. When D.R. Horton objected to the class action on the basis of its mandatory arbitration agreement, the employee filed an unfair labor practice charge with the NLRB, claiming that D.R. Horton’s agreement violated employees’ right to engage in concerted action pursuant to Section 7 of the National Labor Relations Act (“NLRA”). D.R. Horton responded that the Federal Arbitration Act’s (“FAA”) protection of the arbitration process basically trumped the NLRA’s protection of the employee’s right to organize.

The NLRB struck a blow for the employees, holding that an employer cannot bar employees from collective or class actions. This will not be the last word on this important subject. It can be expected that D.R. Horton or other employers will take this matter up in the courts, and claim that AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011) and the FAA trump the NLRA. Employers can already generally unfairly muscle employees into giving up their right to a jury trial; to require employees to give up collective actions in addition, is untenable. We hope that the courts side with the NLRB and the employees, and permit employees to show their collective muscle in class actions. Let’s also hope that a fair legislative fix is on its way!

Jody LeWitter

March 28, 2012

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