It's election time. So here's a short political rant: The National Labor Relations Board is one of the administrative agencies that prove the cliche: elections have consequences. (The President nominates the Board's members, each of whom is confirmed by the Senate to a five-year term.) The President packed the Board with "recess appointments" after the Senate would not confirm his nominees. The Supreme Court voided those recess appointments. And then the Senate confirmed a slate of 5 nominees in a political compromise over filibusters and such. Because advice and consent on the merits. End rant.
Whether you agree or disagree with the administration's politics, it's no secret that the NLRB has set about expanding the reach of the National Labor Relations Act, into non-union settings (like social media policies; handbook policies against insubordination, disloyalty, etc.; confidentiality agreements; and more). It is not an exaggeration to say that non-union employers face more scrutiny by the National Labor Relations Board than they ever have in the past.
The Board also has weighed in on private agreements to arbitrate. The Board made news a couple of years ago when it held that an employer's requiring employees to waive the right to pursue class relief in mandatory arbitration agreements violated the National Labor Relations Act. That was the "DR Horton" decision here. The essence of DR Horton is that class action waivers violate the National Labor Relations Act by requiring employees to give up the right to act in a group (class) concerning wages, hours, or other terms and conditions of employment.
But the Fifth Circuit Court of Appeals refused to enforce DR Horton, meaning it could not be enforced against DR Horton in court, or against other employers as precedent. Other courts also declined to follow DR Horton in part because it has nothing to do with the National Labor Relations Act, and in part because the U.S. Supreme Court has found class waivers to be fine under the Federal Arbitration Act. Even the California courts of appeal have refused to hold class waivers unenforceable under DR Horton.
So, given that courts, which interpret the law that Congress enacts, universally rejected DR Horton, the NLRB's decision is probably relegated to the dust-bin of blips in the employment law radar, never to be heard from again, right?
Political rant redux: Nah, this is the 2014 National Labor Relations Board. They are not constrained by silly federal and state judges and stuff! Ok, I'm done.
The Board's new decision, Murphy Oil (opinion here) gives new life to DR Horton. Based primarily on encouraging law review articles written by law school professors, 3 of 5 members decided to re-affirm DR Horton and declare once again that class action waivers in arbitration agreements violate the NLRA, and will maintain this position until the U.S. Supreme Court says otherwise. Given it will take the federal courts and Supreme Court a few years to take up the issue, this will be the Board's position for a while.
So, in this new case, Sheila Hobson worked for a Murphy Oil facility and signed an arbitration agreement containing this language:
INDIVIDUAL AND COMPANY UNDERSTAND THAT, ABSENT THIS AGREEMENT, THEY WOULD HAVE THE RIGHT TO SUE EACH OTHER IN COURT, TO INITIATE OR BE A PARTY TO A GROUP OR CLASS ACTION CLAIM, AND THE RIGHT TO A JURY TRIAL, BUT, BY EXECUTING THIS AGREEMENT, BOTH PARTIES GIVE UP THOSE RIGHTS AND AGREE TO HAVE ALL EMPLOYMENT DISPUTES BETWEEN THEM RESOLVED BY MANDATORY,Hobson later sued Murphy under the Fair Labor Standards Act, asserting a collective action along with three other employees. The federal district court ordered Hobson to individual arbitration. But Hobson filed a complaint (charge) with the NLRB and the NLRB's General Counsel charged Murphy with an unfair labor practice (forcing Hobson to give up the right to collectively pursue her wage claims).
FINAL AND BINDING ARBITRATION. ANY EMPLOYMENT RELATIONSHIP BETWEEN INDIVIDUAL AND COMPANY IS TERMINABLE AT-WILL, AND NO OTHER INFERENCE IS TO BE DRAWN FROM THIS AGREEMENT.
The NLRB decided 3-2 that Murphy violated the NLRA, that DR Horton was correctly decided and valid, that the circuit courts that rejected it were wrong, and that the 2 dissenting Board members were also wrong.
What is the upshot?
1. Class action waivers in arbitration agreements remain enforceable in court.
2. Employers maintaining class arbitration waivers may expect unfair labor practice charges before the NLRB, including non-union employers.
3. NLRB orders are not enforceable by themselves, in that the NLRB has to go to a federal court of appeals to obtain a judgment. So, unless a circuit court of appeals enforces the Board's order, the legal effect of an unfair labor practice finding is limited to whatever sanctions the Administration can levy on employers who are federal contractors found to violate the NLRA, and to whatever retribution the NLRB may bring against the employer for refusing to comply with its unenforceable order.
4. If a circuit court does choose to enforce the order, it could create a circuit split, providing some incentive for the U.S. Supreme Court to take up the case.
Be careful out there.
