Fifth Circuit Rejects NLRB’s D.R. Horton Decision

In what is being considered a big win for management attorneys and employers, the Fifth Circuit issued a 2-1 decision last week largely overturning the NLRB’s controversial D.R. Horton decision.  D.R. Horton, Inc. v. NLRB, Case No. 12-60031 (5th Cir. Dec. 3, 2013).  As explained in a prior posting, the NLRB and their administrative law judges have issued decisions finding employers commit unfair labor practices when they require employees to sign an arbitration agreement containing a class or collective action waiver.  The NLRB believes such a waiver interferes with employees’ Section 7 rights because it bans the employees’ collective pursuit of workplace grievances through litigation or arbitration.

Last week, the Fifth Circuit issued a written decision overturning the NLRB’s finding that an employer committed an unlawful labor practice when the employer required an employee to sign an arbitration agreement containing a class action waiver.  In its decision, the Fifth Circuit explained the Federal Arbitration Act (“FAA”) requires arbitration agreements to be enforced as written unless (1) grounds exist that would be sufficient to void any other type of contract; or (2) there exists specific language adopted by Congress that supplants the FAA.  The Fifth Circuit found that the NLRB failed to meet its burden in showing that one of these exceptions applied.  Specifically, the Fifth Circuit found that the arbitration agreement did not contain an unlawful objective merely because it contained a provision waiving class action lawsuits and Congress never intended the FAA to be supplanted by the NLRA in the context of employee/employer relationships.  The Fifth Circuit cited the Supreme Court’s decision in AT&T Mobility and long-standing federal law favoring arbitration agreements.

On a separate issue, the Fifth Circuit did agree with NLRB’s argument that employers must clarify to their employees that they are not required to arbitrate their NLRA claims.   Under law, employees retain their right to file unfair labor practice charges with the NLRB and this right cannot be modified by an arbitration agreement.  Therefore, employers should insert specific language in their arbitration agreement specifically excluding claims under the NLRA from arbitration.

McMahon Berger employs over 20 St. Louis Labor Law Attorneys and routinely assists nation-wide companies in drafting or revising their arbitration agreements. If interested in drafting a new arbitration agreement or modifying an existing one for your employees, contact our St. Louis Employment Law Firm at 314-567-7350.