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Board finds that Certain Mandatory Arbitration Agreements Violate Federal Labor Law

The National Labor Relations Board has 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. 

The decision examined one such agreement used by nationwide homebuilder D.R. Horton, under which employees waived their right to a judicial forum and agreed to bring all claims to an arbitrator on an individual basis. The agreement prohibited the arbitrator from consolidating claims, fashioning a class or collective action, or awarding relief to a group or class of employees

The Board found that the agreement unlawfully barred employees from engaging in “concerted activity” protected by the National Labor Relations Act.  The Board emphasized that the ruling does not require class arbitration as long as the agreement leaves open a judicial forum for group claims.

Chairman Mark Gaston Pearce and Member Craig Becker  joined in finding the agreement unlawful. Member Brian Hayes was recused from the case. The decision was finalized on Jan. 3, but was issued publicly by the agency today.

The Board sought briefs on the issue from interested parties last summer. More than a dozen amicus briefs were filed, and can be read on this case page.

The decision requires Horton to rescind the agreement or revise it to make clear to employees that they are not waiving their right to pursue a class or collective action in all forums.

© Copyright 2020 National Labor Relations BoardNational Law Review, Volume II, Number 9

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The National Labor Relations Board is an independent federal agency vested with the power to safeguard employees' rights to organize and to determine whether to have unions as their bargaining representative. The agency also acts to prevent and remedy unfair labor practices committed by private sector employers and unions.

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