An NLRB Administrative Law Judge has issued a decision that significantly broadens the Board’s earlier decision that an arbitration agreement prohibiting class actions violates Section 7 of the Act. Were this decision to be approved by the full Board, it could have serious implications for both non-union and union employers.
Earlier this year, in D.R. Horton, the Board found that arbitration provisions which prohibit employees from bringing class actions can violate Section 7 of the National Labor Relations Act. That section of the Act protects the rights of employees engage in so-called concerted, protected activities. The D.R. Horton decision was notable because, among other things, it appeared to contradict a recent decision from the U.S. Supreme Court in AT&T Mobility , LLC v. Concepcion, which found a class action waiver in an arbitration agreement to be lawful.
This ALJ decision was significant because of the nature of the arbitration policy at issue. Unlike D.R. Horton, employees were not required to sign arbitration agreements, but were allowed to opt out of the process. As a practical matter, therefore, they were not forced to waive their right to bring class action claims.
Yet, the ALJ found that the provision was “an illusion” because the process was “convoluted” and because employees would be unable to identify others who had also opted out. Because of that, he found that the agreement still required employees to forfeit their right to engage in concerted, protected activity and ordered the company to remove the prohibition against class or collective actions and to notify all employees of the change. He also ordered the employer to notify all arbitral or judicial tribunals where it has pursued enforcement of the clause that it desires to withdraw the request.
This decision will almost certainly be reviewed by the full Board and potentially by one of the U.S. Courts of Appeal. The D.R. Horton case is presently being reviewed by the U.S. Court of Appeals for the Fifth Circuit. At least one California court has already rejected arguments that the D.R. Horton decision invalidates otherwise enforceable class action waivers in arbitration agreements.