NLRB Will Not Take “No” For An Answer on Class and Collective Action Waivers

By Nelson Cary and Ben Shepler

A fine line exists between persistence and stubbornness.  Only time (and the United States Supreme Court) will tell how the NLRB’s latest controversial decision will be categorized.  In a 3-2 ruling, the Board in Murphy Oil USA, Inc., 361 N.L.R.B. No. 72 (Oct. 28, 2014) (pdf) strongly reaffirmed its position that employers may not utilize individual arbitration agreements that prevent employees from joining employment-related class or collective actions.

The NLRB first articulated this position in its D.R. Horton decision in January 2012.  Specifically, the Board held that participation in class or collective actions is protected concerted activity under the NLRA, and that D.R. Horton’s arbitration agreement impermissibly prohibited employees from engaging in this form of concerted activity.  The NLRB further argued that the right to participate in class or collective actions did not conflict with the pro-arbitration Federal Arbitration Act, which requires that arbitration agreements be enforced according to their terms. 

The Fifth Circuit Court of Appeals subsequently rejected the NLRB’s reasoning on multiple occasions and refused to enforce the D.R. Horton decision.  Numerous other courts, including the Second and Eighth Circuits, and the California Supreme Court, have also rejected the NLRB’s position.   

Murphy Oil USA, Inc., which involved an arbitration agreement similar to the one utilized by D.R. Horton, offered the Board an opportunity to reassess its position.  Far from doing so, the Board boldly stated that “[w]e have no illusions that our decision today will be the last word on the subject, but we believe that D.R. Horton was correctly decided, and we adhere to it.” 

In a fiery dissent, Member Johnson (R) accused the majority of ignoring the opinions of nearly 40 Federal and State courts and instead choosing to “double down on a mistake that, by now, is blatantly apparent.” 

Needless to say, Murphy Oil will almost certainly appeal the NLRB’s decision, and it is highly likely that the issue will ultimately be decided by the United States Supreme Court.  While we await the next entry in this long-running saga, labor professionals should review all individual, non-collectively bargained arbitration policies.  In particular, labor professionals should:

• Determine whether to include a class or collective action waiver in their arbitration agreements.  Although the NLRB remains undeterred, the clear weight of legal authority supports enforcement of class or collective action waivers in arbitration agreements.
• Make certain that their arbitration policies allow employees to file unfair labor practice charges with the NLRB.  The NLRA prohibits arbitration policies that would reasonably lead employees to believe that they are prohibited from filing unfair labor practice charges with the NLRB. This issue arose in both D.R. Horton and Murphy Oil USA, Inc., and in both cases the employer ran afoul of the prohibition.