The Employer's Legal Resource: Strike Two: Fifth Circuit Once Again Rejects NLRB's Position and Upholds Arbitration Agreement Requiring Employees to Waive Right to Pursue Class and Clooective Actions


At the Employer's Legal Resource 2015 Workshop we hosted earlier this year, we discussed the legality of including mandatory arbitration provisions in employment agreements which, in addition to requiring employees to submit claims to arbitration, also requires employees to waive their rights to bring a class or collective action. The National Labor Relations Board takes the position that such provisions interfere with an employee's right under Section 7 of the NLRA to engage in concerted activity and therefore violates Section 8(a)(1) of the NLRA. The Board also takes the position that employees could reasonably construe the language in such arbitration agreements to preclude employees from filing an unfair labor practice charge, also in violation of Section 8(a)(1).

The Board stated its position in D.R. Horton, decided in January 2012. D.R. Horton was appealed to the Fifth Circuit Court of Appeals. The Fifth Circuit rejected the Board's position, and held (1) the NLRA does not override the Federal Arbitration Act, (2) the use of class or collective action procedures is not a substantive right under the Section 7 of the NLRA, and (3) an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement which requires employment related claims to be resolved through arbitration, and prohibits employee class or collective actions. Several other federal circuit courts of appeal have indicated they would follow the Fifth Circuit's decision in D.R. Horton if they were faced with the same issue.

Several months after the Fifth Circuit's decision in D.R. Horton, the Board decided Murphy Oil. Undeterred by the Fifth Circuit's rejection of its position in D.R. Horton, in Murphy Oil the Board reaffirmed its own position in D.R. Horton, and held the employer violated Section 8(a)(1) by enforcing an agreement which required employees to resolve all employment related claims through individual arbitrations.

Murphy Oil appealed the Board's decision to the Fifth Circuit. As one might imagine, its appellate brief could have been very brief -- simply request the Fifth Circuit to follow what it did in D.R. Horton. And the Fifth Circuit did just that -- it held that its analysis in D.R. Horton governed, and for a second time rejected the Board's position that such arbitration agreements are unlawful.

There is one caveat to the Fifth Circuit's decisions in both D.R. Horton and Murphy Oil. The Court did hold that an agreement reasonably interpreted as prohibiting the filing of unfair labor charges would unlawfully deny employees their rights under the NLRA. Murphy Oil's original arbitration agreement provided that "any and all disputes or claims [employees] may have... which relate in any manner... to... employment" must be resolved by individual arbitration. The Court held this language may create the reasonable impression that an employee is waiving his or her administrative rights, which would violate the NLRA. Following the D.R. Horton decision, Murphy Oil amended its arbitration agreement to add the following language: "Nothing in this agreement precludes [employees]... from participating in proceedings to adjudicate unfair labor practice charges before the [Board]." The Court found this clause was sufficient to remedy the problems it found with Murphy Oil's original arbitration provision.

So as the World Series between the Royals and the Mets concludes, the Board now has two strikes against it in the way it has dealt with provisions in employment contracts which require an employee to submit to arbitration and to waive bringing class or collective actions. But employers who use an arbitration provision in their employment contracts are cautioned to make sure the provision does not create a "reasonable impression" that an employee is waiving the right to bring an unfair labor practice charge.

By Jon E. Brightmire,

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Justin B. Munn

Justin B. Munn

Justin represents clients throughout Oklahoma in family law, civil litigation, guardianships, adoptions, estate planning, trust and probate matters. 

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