D.R. Horton Quietly Overturned: Class Action Waivers In Arbitration Agreements Upheld, Again

By: Marty Heller

In January 2012, the National Labor Relations Board issued a controversial decision, ruling that employers are not entitled to force employees to sign arbitration agreements with class action or collective action waivers in them because, in the NLRB’s view, it violates the employees’ right to engage in concerted activity. This ruling appeared to directly contradict the Supreme Court’s decision in AT&T Mobility v. Concepcion, and the Supreme Court’s line of recent rulings upholding the enforceability of contractual provisions included in arbitration agreements.

Last month, the Fifth Circuit heard an appeal of the D.R. Horton Matter and very quietly overturned the NLRB’s decision. The appeals court found that the NLRB failed to give “proper weight” to the Federal Arbitration Act, which strongly favors enforcement of arbitration agreements.

Although this ruling has no effect on the NLRB’s position on this issue, it is another big win for employers who are using arbitration agreements in the battle against the rapid increase of employment class and collective claims, especially collective actions under the FLSA. Practically speaking, we continue to believe that the use of an arbitration agreement is perhaps the greatest defense (aside from perfect wage/hour practices) against FLSA claims.

Finally, this decision provides an interesting conversation starter regarding the active (perhaps overactive) NLRB, as we await oral arguments next week in a case that may overturn hundreds (if not thousands) of NLRB decisions.