September 06, 2013 Articles

Does the NLRA Trump the FAA? Apparently Not

By Judge Bruce Meyerson

In In re D. R. Horton, Inc., 357 N.L.R.B. 184 (Jan. 3. 2012), the National Labor Relations Board (Board) considered whether an employer violates the National Labor Relations Act (NLRA) when it requires covered employees, as a condition of employment, to sign an agreement that precludes them from filing in an arbitral forum, class, or collective claims, addressing wages, hours, or other working conditions. Viewed at the time by some as a means of distinguishing the Supreme Court's decision in AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), now, almost two years later, the verdict is in—the overwhelming majority of courts have refused to follow the Board's ruling.

The D.R. Horton Decision
The core holding in D.R. Horton is that an arbitration agreement that restricts employees from being part of a class or collective arbitration violates employees' rights to take part in concerted action protected by Section 7 of the NLRA. That provision grants to covered employees the right "to engage in . . . concerted activities for the purpose of . . . mutual aid or protection" which includes efforts to "improve terms and conditions of employment." 29 U.S.C. § 157. The Board found the right of employees to engage in concerted action was a "substantive" right that was not inconsistent with the Supreme Court's decision in AT & T Mobility LLC v. Concepcion, and the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. After "carefully accommodating" the purposes underlying the NLRA and the FAA, absent clearly expressed congressional intent to the contrary, the Board concluded that both federal statutes should be given effect. Central to the reasoning of the Board was the conclusion the NLRA grants rights to employees that take precedence over the purpose of the FAA which, among other things, is to rigorously enforce the terms of an arbitration agreement. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).

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