A “bare” class action waiver in an employment contract was enforceable even though it was not part of an arbitration clause, a divided Fifth Circuit holds.
The law is well-settled in the Fifth Circuit: an employer may include a class action waiver (“CAW”) in a predispute arbitration agreement (“PDAA”). Specifically, in 2012, the National Labor Relations Board (“NLRB” or “Board”) ruled in D.R. Horton Inc., 357 NLRB No. 184 (2012), that class action waivers in predispute arbitration agreements violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”) because they interfere with the employees’ statutory right to “concerted activities” protected by section 7. The Fifth Circuit reversed the Board’s policy in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). Later, in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), cert. granted, 137 S.Ct. 809 (2017), the Court held that “an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions and requiring employment-related claims to be resolved through individual arbitration.” Murphy Oil is one of the three consolidated cases set for oral argument at SCOTUS in October, involving whether the Federal Arbitration Act (“FAA”) prevails over the NLRA when it comes to enforcing class action waivers in employment arbitration agreements. But, what if the CAW is not contained in a PDAA? “It doesn’t make a difference,” a divided Fifth Circuit holds in Convergys Corp. v. NLRB, No. 15-60860 (5th Cir. Aug. 7, 2017).
Bound by Circuit Precedent
Judge Elrod, joined by Judge Higgenson as to the outcome, writes that Horton requires the CAW be enforced irrespective of whether there is a PDAA: “Despite our decision in Horton and similar rulings by a majority of circuits that have considered the issue, the Board has persistently clung to its view that Section 7 guarantees a substantive right to participate in class and collective actions, and we have persistently declined to enforce Board orders based on this disregard of our law. We recognize that the Supreme Court’s decision in [Murphy Oil] may resolve the issue shortly. In the meantime, however, we must apply our circuit’s binding precedent” (footnotes omitted). Judge Elrod added that Horton was based on its interpretation of the NLRA, not solely on the FAA, and that accordingly “the Board’s argument that Horton is limited to the arbitration context is unpersuasive.”
Dissent: Only Class Action Waivers in Arbitration Agreements are Protected
Judge Higginbotham’s dissent argues that Horton and its progeny are confined to CAWs found in PDAAs, and that a bare CAW violates the NLRA: “Although this Court has held time and again that such waivers are permissible, one important distinction makes the waiver in this case different: there is no arbitration agreement. Without being contained in an arbitration agreement and thus shielded by the protective force of the Federal Arbitration Act … a bare class and collective action waiver violates [NLRA] Section 8(a)(1)” (footnotes omitted). Judge Higgenson agrees in principle, but believes the Court is constrained to follow the Circuit precedent established by Horton.
(ed: *All three judges recognize that SCOTUS may soon resolve the issue. **We’re with the dissent. Take away the arbitration context and we are left with giving the Board deference to its interpretation of the NLRA. ***Two days later, the same panel broke the same way in Logisticare Solutions, Inc. v. NLRB, No. 16-60029 (5th Cir. Aug. 9, 2017), a case having a very similar fact pattern and issues.) (SAC Ref. No. 2017-31-03)
Like what you see here?
Twice a week we present blog posts consisting of one write-up from each of our two flagship weekly online Alert services. Consider a subscription to these publications to receive the full array of coverage right on your desktop every week. Give it a try and sign up for a free trial to the Securities Arbitration Alert and the Securities Litigation Alert.