January 2012

By: James B. Sherman, Esq.

Last year the U. S. Supreme Court ruled in AT&T Mobility, LLC v. Concepcion that a mandatory arbitration clause contained in customer service contracts prevented customers from pursuing class-action claims. The rationale of this decision would seem to apply equally to employment based claims. This year, however, the National Labor Relations Board has cast serious doubt on the application of AT&T in the employment context. Specifically, the NLRB declared that any agreement that would prevent employees from joining together to pursue class-action employment claims, whether in court or in arbitration, violates federal labor law. The case, D. R. Horton, Inc., is among the NLRB’s first decisions of 2012 and is unquestionably among the most controversial rulings of the Board under the Obama administration early in this election year.

The Board’s decision rested on Section 7 of the National Labor Relations Act which protects, among other things, employees’ rights to engage in “concerted activities” for “mutual aid and protection.” More commonly, this phrase refers to the right to joint or participate in a labor union. However, concerted activities can also include employees joining together to pursue workplace grievances, even where no union is involved. The Horton Board takes this principle a step further, asserting that Section 7 of the Act includes the pursuit of such grievances, collectively, in arbitration as well as in litigation.

The present Board has unquestionably expanded Section 7 rights under the NLRA to new heights. This expansion has extended the reach of Section 7 into all of social media with the Board’s so-called “Face Book” decisions and, now, the asserted right to pursue class action employment claims, whether in court or in arbitration. Because the employer’s arbitration agreement in Horton – just as the one sanctioned by the Supreme Court just last year in AT&T – was read to prevent class action claims, the Board found that the agreement violated federal labor law.

An appeal of this controversial decision seems very likely. In the meantime, employers that use mandatory arbitration agreements for their employees will want to have them reviewed to determine if they pose a potential labor law violation in view of the NLRB’s decision in Horton. For help with reviewing agreements or to determine if mandatory arbitration of employee grievances, whether in a union or non-union employment setting, is right for your organization, contact James Sherman at: jasherman@wesselssherman.com or 952-746-1700.