NLRB Extends DR Horton to Invalidate Optional Arbitration Agreements With Class Waivers

Topics: Arbitration Agreements

Employers will recall that in recent years, an increasingly activist NLRB has undertaken to thwart employers’ ability to adopt and enforce mandatory arbitration policies with their employees.  This started with the D.R. Horton case, in which the NLRB held that a mandatory arbitration agreement with a class action waiver violates employees’ Section 7 rights to engage in collective, concerted activity for mutual aid and protection.  Although the Fifth Circuit Court of Appeals denied enforcement of the NLRB’s order in D.R. Horton, and courts have overwhelmingly rejected the NLRB’s position in D.R. Horton, the NLRB nonetheless has maintained its position that arbitration agreements with class action waivers are unenforceable.

In August, the NLRB ruled in On Assignment Staffing Services, Inc. that an employment arbitration agreement with a class waiver was void even though employees were given 10 days to opt out of the agreement.  The NLRB ruled that notwithstanding the limited opt-out right, the arbitration agreement still “reasonably interfered” with employees’ Section 7 rights because employees only had 10 days to opt out and had to follow a specific procedure in order to do so.  The NLRB reasoned that employees should not be required to take affirmative steps in order to protect their Section 7 rights and that the opt-out process burdened those rights.

Last week, the NLRB further extended the reach of its D.R. Horton doctrine, this time holding that even a plainly optional arbitration agreement with a class waiver violates employees’ Section 7 rights.  In Bristol Farms, the arbitration agreement stated on its face that it was “optional.”  Thus, signing the agreement was optional and did not involve a situation where the agreement would automatically become binding unless the employee followed a specified opt-out procedure.  Regardless, the NLRB ruled that the class waiver was void because it still resulted in employees prospectively waiving the ability to engage in collective concerted activity.  According to the NLRB, this prospective waiver of Section 7 rights is void regardless of whether or not employees have the option of agreeing or not agreeing to the waiver.

The Bristol Farms decision was a split decision (2-1) with Member Miscimarra strongly dissenting. 

Employers with arbitration agreements containing class waivers will continue to face possible dual litigation over the enforceability of the waiver, likely with conflicting results depending on whether a court or the NLRB is assessing enforceability.