February 07, 2012 Articles

NLRB Rules Collective-Action Waivers Are Unlawful

The NLRB ruled it is a violation of federal law to require employees to sign arbitration agreements that prevent them from joining to pursue legal claims

by Breanna Harris

In a decision that ostensibly conflicts with recent U.S. Supreme Court decisions, the National Labor Relations Board (NLRB) ruled that it is a violation of federal labor law to require employees to sign arbitration agreements that prevent them from joining together to pursue employment-related legal claims in any forum, whether in arbitration or in court. D.R. Horton Inc., 357 N.L.R.B. No. 184 (2012).

In a 2–0 vote (Member Brian Hayes was recused from the case), the board held that D.R. Horton, a Florida-based home builder, committed an unfair labor practice in violation of federal labor law when it instituted a mandatory arbitration agreement that waived employees' rights to participate in class or collective actions. Specifically, the board found that the arbitration agreement—under which employees waived their right to a judicial forum and agreed to bring all claims to an arbitrator on an individual basis and which prohibited arbitrators from consolidating claims, fashioning a class/collective action, or awarding relief to a group/class of employees—interferes with the statutory right of employees under section 7 of the National Labor Relations Act (NLRA) to engage in "concerted activity" for their mutual aid or protection. As a remedy, the board required D.R. Horton to revise or rescind its mandatory arbitration agreement to comply with the NLRA and to provide sufficient notice to employees of the revision/rescission and of employees' rights under the NLRA.

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