The National Labor Relations Board (“NLRB” or the “Board”) continued its dogged commitment to its own supremacy in any matter relating to employment and strenuously reaffirmed its decision in D.R. Horton, 357 NLRB No. 184 (2012). In Murphy Oil USA, Inc., 361 NLRB No. 72 (October 28, 2012), the NLRB rejected the reasoning of dozens of federal courts and two dissenting Board members to hold once again that class action waivers in employment arbitration agreements violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”). The NLRB again held that Section 7 of the NLRA protects any collective action related to terms and conditions of employment, including pursuit of class action employment litigation or class arbitration. The NLRB insisted that its now routine decisions invalidating arbitration agreements do not conflict with the Federal Arbitration Act (“FAA”) or the well-established national policy favoring arbitration.
In Murphy Oil, the employer, operator of a chain of fueling stations in twenty-one states, required all employees to sign an arbitration agreement that included a waiver of the right to a jury trial relating to all employment-related disputes and the right to participate in a class or collective action in an employment-related dispute. Instead, employees were required to agree, as a condition of employment, to individually arbitrate almost all employment related claims.
An employee who signed the agreement filed a class action lawsuit in federal court along with several other employees alleging violations of the Fair Labor Standards Act. Murphy Oil relied on the arbitration agreement to stay the class action proceedings and the court issued an order to enforce the arbitration agreement – requiring the employees to arbitrate individually their claims.
During the federal court litigation, the employee also filed an unfair labor practice charge (“ULP”) alleging that arbitration agreement violated the NLRA by restricting employee rights to file charges with the NLRB and by requiring employees to waive class litigation and agree to individual arbitration. Soon after the ULP was filed, Murphy Oil revised the agreement to state that it did not restrict an employee’s right to engage in protected, concerted activity, under the NLRA.
Murphy Oil and the NLRB General Counsel agreed to transfer the case directly to the NLRB for hearing instead of presenting it to an NLRB Administrative Law Judge. In the end, a three-member majority of the NLRB defiantly re-affirmed its holding in D.R. Horton and held that:
- Murphy Oil’s mandatory arbitration agreement violated the NLRA because it led employees to believe they could not file NLRB charges (even with Murphy Oil’s revisions to the agreement that expressly stated employees could do so);
- Murphy Oil’s mandatory arbitration agreement violated the NLRA by requiring a waiver of class litigation rights; and
- Murphy Oil violated the NLRA by enforcing the arbitration agreement’s class litigation waiver in federal court (even though the court granted Murphy Oil’s motion and enforced the arbitration agreement).
In reaching its decision, the NLRB clung steadfastly to its decision in D.R. Horton, vigorously insisting that the pursuit of any “collective” actions relating to employment conditions were “substantive” rights protected under Section 7’s general language. Not only did the three-member NLRB majority aggressively reaffirm D.R. Horton, but it also rejected several federal court decisions rejecting the D.R. Horton “doctrine,” including the Fifth Circuit’s lengthy analysis and decision in D.R. Horton, Inc. v. NLRB, 737 F.3d 244 (5th Cir. 2013).
Specifically, the NLRB majority summarily dismissed the Fifth Circuit’s contrary conclusion that while collective action may fall within Section 7’s protections, the FAA and national policy favoring arbitration as expressed through numerous, recent U.S. Supreme Court decisions, rendered arbitration class litigation waivers lawful.
Based on its holding, the NLRB majority ordered Murphy Oil to:
- Cease and desist from maintaining the mandatory arbitration agreement;
- Rescind the mandatory arbitration agreement or revise it to exclude the class litigation waiver and notify all current and former employees and applicants of the rescission;
- Notify the federal district court that enforced the mandatory arbitration agreement that it has rescinded the agreement and that Murphy Oil will engage in class litigation of the claims; and
- Pay the class plaintiffs’ attorney fees for defending Murphy Oil’s motion to enforce the mandatory arbitration agreement’s terms.
The NLRB’s two remaining members filed stern dissents. Member Miscimarra opposed the majority on grounds that Section 7’s protection does not encompass the pursuit of class action litigation or arbitration and that, moreover, the U.S. Congress did not grant the NLRB authority to dictate how courts and other federal agencies adjudicated non-NLRB claims. Additionally, he pointed to Section 9(a) of the NLRA and concluded that the statute itself granted employees the right to “individually” resolve their grievances – which is exactly what the arbitration agreement did – and noted that, in accord with dozens of federal court decisions, the FAA rendered class waivers lawful. Finally, Member Miscimarra rejected the majority’s conclusion that it had the authority to order an employer to pay claimants’ attorneys’ fees for defending a lawful motion which a federal court granted.
Member Johnson’s dissent was more pointed and stated at the outset that:
[w]ith this decision, the majority effectively ignores the opinions of nearly 40 Federal and State courts that, directly or indirectly, all recognized the flaws in the Board’s use of a strained, tautological reading of the National Labor Relations Act in order to both override the Federal Arbitration Act and ignore the commands of other Federal statutes. Instead, the majority chooses to double down on a mistake that, by now, is blatantly apparent.
As member Johnson’s dissent notes, there are currently 37 cases pending before the NLRB arising from the application of D.R. Horton’s controversial holding. Based on the three-member majority’s insistence that its expansive reading of the NLRA trumps all other federal statutes and decisional law, the battle will undoubtedly be fought to the U.S. Supreme Court. Notably, the NLRB did not appeal the Fifth Circuit Court’s rejection of D.R. Horton to the Supreme Court last year and, thus, continues to strike down employment arbitration agreements in other regions of the country.
Until the Supreme Court weighs in on D.R. Horton, employers with mandatory arbitration agreements must consider the benefits of including class litigation waivers as against the NLRB majority’s crusade to strike down any arbitration agreements containing them. As we have since D.R. Horton was first decided, Zashin & Rich will continue to track developments and provide updates to employers.
Stephen S. Zashin, an OSBA Certified Specialist in Labor and Employment Law, appears before the National Labor Relations Board and practices in all areas of labor relations. For more information about D.R. Horton or any other labor or employment matter, please contact Stephen | ssz@zrlaw.com | 216.696.4441