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Fifth Circuit (Again) Reverses NLRB and Finds Class Action Waivers in Arbitration Agreements Do Not Violate the NLRA

The battle between the NLRB and the Fifth Circuit rages on, as the Fifth Circuit again ruled that employers do not violate the National Labor Relations Act when they require employees to sign arbitration agreements containing class/collective action waivers.

The dispute between the NLRB and the Fifth Circuit began in 2012 when the NLRB in D. R. Horton found that an employer violates the NLRA when it requires employees “as condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer.” (See Mintz’s previous analysis here.)  Although the Fifth Circuit unanimously reversed the D. R. Horton decision, when the NLRB faced the identical class action waiver question in 2014 in Murphy Oil, the NLRB indicated it had “independently reexamined” D. R. Horton and concluded: “Today we reaffirm that decision.”

But like the NLRB, the Fifth Circuit also decided to reaffirm its own prior decision holding that “Murphy Oil committed no unfair labor practice by requiring employees to relinquish their right to pursue class or collective claims in all forums by signing the arbitration agreements at issue here.”  And it pulled no punches in recapping the history of its difference of opinion with the NLRB: “the Board disregarded this court’s contrary D. R. Horton ruling that such arbitration agreements are enforceable and not unlawful.  Our decision was issued not quite two years ago; we will not repeat its analysis here.. . . [and we] do not celebrate the Board’s failure to follow our D. R. Horton reasoning.”  At the same time, it did not necessarily find the Board’s decision objectionable or its conduct sanctionable.  The Firth Circuit recognized that the Board’s Murphy Oil decision could have been reviewed by a different federal court – one that viewed the law differently than the Fifth Circuit.

Practical Effect

This decision also puts an end to the Chesapeake Energy Corp. case where in April the NLRB once again reaffirmed its D. R. Horton decision – a decision that also appealed to the 5th Circuit.  However, just as with the 5th Circuit’s previous D. R. Horton decision, the Murphy Oil decision provides no clarity for nationwide employers. The NLRB appears unlikely to change course without clear direction from the Supreme Court, and the lack of clarity in the meantime benefits no one.  Mintz continues to recommend employers looking for a safer alternative allow employees to opt out of pre-employment arbitration agreements.  Further, all employers should consult with local counsel in drafting any arbitration agreement offered employees at the outset of their employment.

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Brent Douglas