NLRB Rules Mandatory Class Action Waivers Unlawful: 6 Takeaways for Employers & Employees

On January 3, 2012, the National Labor Relations Board ruled in D.R. Horton that the National Labor Relations Act prohibits mandatory arbitration policies forcing employees to give up their rights to participate in class action lawsuits over workplace conditions. As a result, employers with arbitration policies in place will need to review those policies to ensure compliance with the NLRB ruling.

For your reference, six things you should know about the NLRB’s rejection of class action waivers as a condition of employment:

1.It doesn’t apply to all workers: 

“… the D.R. Horton decision applies only to ‘employees’ as that term is defined in the NLRA. The ruling has no application to managerial employees, supervisors, or independent contractors, none of whom have rights protected under the NLRA.” (Arbitration Agreement Barring Class Litigation Violates the NLRA by Morgan Lewis)

2.It doesn’t apply to all employers:

“It is important to note that the board’s decision applies only to employers covered by the NLRA… Excluded from coverage are public-sector employers, agricultural and domestic employers, employers covered by the Railway Labor Act, and certain small businesses that are exempt based upon their annual volume of business.” (NLRB Strikes Down Class Action Waivers in Employment Arbitration Agreements by Wilson Sonsini Goodrich & Rosati)

3.The NLRB considers class actions to be protected, concerted activity:

“The NLRB found that the agreement violated Section 8(a)(1) of the NLRA because it interfered with employees’ right to engage in protected, concerted activity. The NLRB reasoned that class and collective actions are a form of protected, concerted activity.” (NLRB Finds Arbitration Provision Banning Class and Collective Actions to be Unlawful by Foley Hoag LLP)

4.Employers can still propose limited class action waivers:

“The Board attempted to ‘narrow’ its holding when it concluded that it was only compelling employers to not require employees to waive their NLRA rights to collectively pursue litigation or employment claims in all forums, arbitral and judicial.” (Legal Alert: Class Action Preclusion and the NLRB by Ford & Harrison LLP)

5.The ruling does not force employers to allow class actions: 

“Ultimately, the Board did not hold that employers are required to permit class actions in arbitration. Rather, it held that employers cannot mandate a wholesale waiver and foreclose the class action remedy in both arbitral and judicial forums.” (National Labor Relations Board Limits Class Action Waivers in the Employment Context by Manatt, Phelps & Phillips, LLP)

6.We probably haven’t heard the last of this:

“… the decision is likely going to be appealed to the federal Courts of Appeals and then, if necessary, the U. S. Supreme Court. And there is also the fact that NLRB precedent sometime changes with the political cycles.” (Class Action Waiver For Employment? Not So Fast, Says the NLRB by Pullman & Comley, LLC)

See also:

The NLRB Invalidates Complete Class Action Waivers as a Condition of Employment (Miller & Martin PLLC)

NLRB Invalidates Class Waivers (Mario Bordogna)


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