By David P. Frantz
On October 26, 2015, the U.S. Court of Appeals for the Fifth Circuit once again butted heads with the National Labor Relations Board (“NLRB”) over the issue of class and collective action waivers in employment dispute arbitration agreements. See Murphy Oil USA, Inc. v. NLRB, No. 14-60800 (5th Cir. Oct. 26, 2015). In Murphy Oil, the Fifth Circuit rejected the NLRB’s decision that arbitration agreements with class/collective action waivers violate employees’ rights to engage in protected concerted activity under Section 7 of the National Labor Relations Act (“NLRA”). The Fifth Circuit’s December 2013 decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) (which Z&R discussed here) reached the same conclusion.
In D.R. Horton, the Fifth Circuit previously held that the NLRA does not prohibit mandatory arbitration agreements with class/collective action waivers. The court explained that class or collective action procedures are not substantive legal rights; they are merely procedural devices. Thus, the NLRA’s protection of employees’ substantive rights does not extend to filing class or collective actions. However, the Fifth Circuit also held that the language of the arbitration agreement at issue reasonably could be construed to prohibit employees from filing unfair labor practice charges (“ULP”) with the NLRB. Such prohibitions violate the NLRA.
When issuing its underlying decision in Murphy Oil, the NLRB engaged in “Board nonacquiescense” and disregarded the Fifth Circuit’s D.R. Horton holding. Murphy Oil involved four employees who filed a federal wage and hour collective action after signing arbitration agreements with class/collective action waivers. Murphy Oil moved to dismiss and compel arbitration, and the federal court stayed the collective action proceeding pending arbitration (which never was initiated). While the motion to dismiss was pending, one of the employees filed a ULP with the NLRB, alleging the arbitration agreement violated her rights under the NLRA.
In October 2014, ten months after the Fifth Circuit’s ruling in D.R. Horton, the NLRB issued its decision in Murphy Oil, holding that the arbitration agreement violated the employees’ substantive rights under the NLRA and reasonably could be construed to prohibit employees from filing ULPs. The NLRB also found that Murphy Oil’s motion to dismiss and compel arbitration in the wage and hour lawsuit was a separate violation of the NLRA. The NLRB determined that Murphy Oil “acted with an illegal objective in seeking to enforce an unlawful contract provision.”
On appeal before the Fifth Circuit, the court reaffirmed its analysis in D.R. Horton, stating: “Our decision was issued not quite two years ago; we will not repeat its analysis here.” Murphy Oil asked that the court hold the NLRB in contempt for its “defiance” of the D.R. Horton decision. The court declined to do so because the NLRB’s Murphy Oil decision could have been appealed in a number of jurisdictions outside the Fifth Circuit, and the NLRB may not have known which circuit’s law would apply. The court stated, “[w]e do not celebrate the Board’s failure to follow our D.R. Horton reasoning, but neither do we condemn its nonacquiescence.”
The Fifth Circuit also addressed whether Murphy Oil’s arbitration agreements reasonably could be construed to prohibit the filing of ULPs. The court examined two versions of the arbitration agreements: one in effect for employees hired before March 2012, and a revised version for employees hired thereafter. The pre-March 2012 version included language that “any and all disputes or claims” must be resolved through arbitration. The Fifth Circuit held that this broad “any claims” language, without any qualification, can create the reasonable impression that the employee is waiving both trial rights and administrative rights. Employee-employer agreements that limit the NLRB’s ability to prevent unfair labor practices violate the NLRA. As waivers of administrative rights would have such an effect, they are illegal.
The Fifth Circuit did not hold that the arbitration agreement must expressly state that the employee may file ULPs with the NLRB; however, “[s]uch a provision would assist, though, if incompatible or confusing language appears in the contract.” Murphy Oil’s revised arbitration agreement included such language, stating that it does not preclude employees from participating in ULP proceedings. Based on this language, the Fifth Circuit held that the revised agreement was valid.
Finally, the Fifth Circuit rejected the NLRB’s conclusion that Murphy Oil violated the NLRA by moving to dismiss and compel arbitration in the wage and hour suit filed by its employees. Based in part on its D.R. Horton decision, the court held Murphy Oil’s motion was not a baseless attempt at discouraging employees from exercising their rights under the NLRA.
The Murphy Oil decision reassures employers that, at least in the Fifth Circuit, arbitration agreements with class and collective action waivers are enforceable. Likewise, the Second, Eighth, Ninth, and Eleventh Circuits have reached the same conclusion or indicated that they would. However, employers should ensure that their arbitration agreements and class/collective action waivers cannot be construed to prohibit employees from pursing administrative claims, including ULPs.
*David P. Frantz practices in all areas of labor and employment law. If you have questions about the Murphy Oil decision, arbitration agreements, or class and collective action waivers, please contact: David P. Frantz | dpf@zrlaw.com | 216.696.4441
