National Labor Relations Board (NLRB) Rules That Policy Requiring Employees to Individually Arbitrate Employment Disputes Violates the National Labor Relations Act
On June 3, 2013 an National Labor Relations Board (NLRB) Administrative Law Judge (ALJ) reached a decision in which it found that MasTec Services’ Company’s policy that required employees to individually arbitrate employment disputes violated Section 8(a)(1) of the National Labor Relations Act (NLRA). In so holding, the ALJ radically expanded the NLRB’s previous decision in D. R. Horton, Inc. (1/3/12). As D.R. Hortonitself has been rejected by almost all federal courts which have considered it, the MasTec decision is bound to create a firestorm of criticism.
In D.R. Horton, the NLRB ruled that requiring employees to sign a blanket waiver of rights to pursue their employment claims through class actions violated Section 8(a)(1) of the NLRA. The specific agreement at issue in D.R. Horton (1) contained a mandatory arbitration provision, and (2) required employees to bring all employment-related claims to an arbitrator on an individual basis, as opposed to as a potential class action. The D.R. Horton decision generated significant criticism, and many commentators noted that it appeared to conflict with U.S. Supreme Court precedent, specifically AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Concepcion held that the Federal Arbitration Act preempts state laws that prohibit contracts from disallowing class-wide arbitration, and that companies can enforce contract provisions that require customers to arbitrate their disputes individually. Concepcion, which involved a consumer contract, was thought to make it much harder for individuals – not only consumers, but also employees who had signed arbitration agreements – to file class action lawsuits.
Although D.R. Horton initially caused great concern among employers, as it seemed to eliminate the possibility of preventing class suits through mandatory arbitration agreements, this concern has been tempered by the fact that an overwhelming number of federal courts that have considered the issue have refused to follow the decision, including the Eighth Circuit Court of Appeals. See e.g., Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013); Delock v. Securitas Security Servs. USA, Inc., 883 F. Supp. 2d 784 (E.D. Ark. 2012); Morvant v P F Chang’s China Bistro Inc., 2012 WL 1604851 (N.D. Cal. 2012); De Oliveira v. Citicorp North America, Inc. (M.D. Fla. 2012); Tenet Healthsystem Philadelphia, Inc. v. Rooney (E.D. Pa. 2012); Lavoice v. UBS Wealth Management Americas (S.D.N.Y. 2011); Johnmohammadi v. Bloomingdales, Inc. (C.D. Cal. 2012); Sanders v. Swift Transp. Co. of Ariz., 843 F Supp. 2d 1033, (N.D. Cal. 2012); Palmer v. Convergys Corp., 2012 WL 425256 (M.D. Ga. 2012).
MasTec is sure to be controversial because, despite the courts’ hostile reaction to D.R. Horton, MasTec expands its holding. The arbitration provision at issue in MasTech was less restrictive than that in D.R. Horton, in that it (1) permitted the employee to opt out within 30 days, and (2) explicitly authorized employees to bring claims to administrative agencies. Nonetheless, even with these safeguards in place, the ALJ found the provision to violate Section 8(a)(1). The ALJ gave three independent reasons for reaching this conclusion. First, given that the NLRA grants employees the right to engage in protected concerted activities without interference, an employer may not require its employees to affirmatively act (through the opt-out) in order to obtain or maintain those rights. Second, employees who opt out still would be unable to engage in and cooperate in concerted activities with those who did not opt out, disadvantaging them in their attempts at concerted action. Third, some employees may be reluctant to exercise the opt-out option for fear of angering their employers. Under the reasoning of the Mas Tec opinion, it would be virtually impossible for any employer to include a class action waiver in arbitration agreements with individual employees.
D.R. Horton itself is currently on appeal before the U.S. Court of Appeals for the Fifth Circuit. Should the NLRB and Federal Court decisions continue to diverge, the stage may be set for a reversal ofD.R. Horton (or perhaps a Supreme Court decision). We will continue to monitor D.R. Horton and its progeny, given the case’s broad implications for employers potentially subject to employee class actions.