Several months ago, a California Court of Appeal upheld a class action waiver and compelled arbitration of an employee’s wage and hour claim following the Supreme Court’s AT&T Mobility case. In doing so, the court rejected the NLRB’s determination in D.R. Horton Inc. that such a class action waiver violates the NLRA. A second California appeals court has followed suit in Nelsen v. Legacy Partners Residential Inc.
The court called the Horton ruling a novel interpretation of the NLRA and held that absent specific statutory language or clear legislative history of Congress’ intent, the NLRA would not override an arbitration agreement entered into between two parties – even one that included a class waiver.
In this case, the plaintiff worked as a property manager for the employer and about a year after her employment ended, she filed a putative wage and hour class action against the employer under the California Labor Code as well as the California Unfair Competition Law and Business and Professions Code. After the court granted the employer’s motion to compel arbitration, the plaintiff appealed.
The Court of Appeal rejected the argument that the agreement was unconscionable and violated California public policy. The court found that the agreement precluded the plaintiff from filing a class action and also from pursuing class arbitration.
In speaking of Horton and the NLRB’s holding that a class arbitration waiver violated the NLRA, the court declined to follow it “for a number of reasons.” First, the court noted that only two board members had approved the decision. Additionally, the court found that the NLRB stepped outside its “core expertise” when deciding on the interplay between class action litigation, the Federal Arbitration Act and the NLRA. Finally, the court found that the board offered no precedent to support its decision.
Once again, while Horton may hold some precedential value for NLRB matters, the courts seem to have little regard for its reasoning or precedential value.
On January 3, 2012, the NLRB held that a nationwide home builder committed an unfair labor practice under the National Labor Relations Act (NLRA) by implementing a mandatory arbitration agreement that waived the rights of employees to participate in class or collective actions (D.R. Horton Inc. and Michael Cuda, 357 NLRB 184, 1/3/11). In short, the NLRB held that employers may not compel employees to waive their right to collectively pursue litigation of employment claims in all forums, arbital and judicial.
Michael Cuda, a superintendent for Horton, claimed that he and other similar superintendents for the company were prevented from pursuing a wage and hour class-action/collective-action under the Fair Labor Standards Act (FLSA); alleging that they were misclassified as exempt employees. Horton required Cuda and other employees to execute an arbitration agreement whereby they individually agreed to forego class-action relief of all types relating to any employee dispute. NLRB Chairman Mark Gaston Pearce (D) and Member Craig Becker (D) found that this mandatory arbitration procedure violated Section 8(a)(1) of the NLRA because it interfered with the statutory right of employees to engage in “protected concerted activity for their mutual benefit.”
In so holding, the NLRB took issue with the U.S. Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion, U.S., No. 09-893, 4/27/11. In Concepcion, the court, in a 5-4 decision, enforced AT&T’s customer cellular telephone contract that provided for mandatory arbitration on an individual basis and prohibited class action proceedings despite conflicting California state law. The court essentially held that the Federal Arbitration Act (FAA) preempts state laws that prohibit contracts from preventing class-action lawsuits. In judicial decisions that have since followed Concepcion, courts throughout the U.S. have concluded that employees may waive class-action rights by agreeing to individualized arbitration through employment arbitration agreements.
In distinguishing Concepcion, the NLRB held that employment arbitration agreements (unlike consumer contracts) cannot prevent employees from waiving their rights protected by the NLRA (i.e. collectively pursue wage/hour claims and/or disputes over terms and conditions of employment). The NLRB also reasoned that Concepcioninvolved a conflict between the FAA and a California state law, which implicated the U.S. Constitution’s Supremacy Clause; whereas in D.R. Horton the Supremacy Clause was not called into question as the issues involved purely federal statutes (FAA vs. the NLRA).