December 3, 2013

Individual arbitration is not an “unfair labor practice”

By Deborah J. La Fetra Senior Attorney

In D.R. Horton v. Cuda, Michael Cuda filed a labor claim against his employer, homebuilder D.R. Horton, purporting to act as a representative for a class.  D.R. Horton required all employees to sign a mutual arbitration agreement, however, that precluded class claims in any arbitral or judicial forum.  The National Labor Relations Board, decided that D.R. Horton violated the National Labor Relations Act by infringing on its employees’ right to act “in concert” with each other, and had thereby committed an “unfair labor practice.”  D.R. Horton appealed, and PLF, joined by the NFIB Small Business Legal Center, filed an amicus brief.

Today, the Fifth Circuit Court of Appeals reversed the Board.  The Board’s holding assumed that the use of a class action procedure is a substantive right, and the Fifth Circuit flatly repudiated that, on the basis of numerous Supreme Court and other decisions.  The Fifth Circuit also rejected the Board’s view that the policies underlying the NLRA trump the different policy considerations in the Federal Arbitration Act.  It held that the Supreme Court decision in AT&T Mobility v. Concepcion, which prohibits statutory constructions that disfavor arbitration, forecloses the Board’s position.  Thus, it concluded:

“The NLRA should not be understood to contain a congressional command overriding application of the FAA.  The burden is with the party opposing arbitration, and here the Board has not shown that the NLRA’s language, legislative history, or purpose support finding the necessary congressional command.  Because the Board’s interpretation does not fall within the FAA’s ‘saving clause,’ and because the NLRA does not contain a congressional command exempting the statute from application of the FAA, the Mutual Arbitration Agreement must be enforced according to its terms.”

The Board’s decision had been relied upon by the California appellate courts in several decisions striking down arbitration agreements with class action waivers.  Many of those cases are now pending in the California Supreme Court so this Fifth Circuit decision should have an immediate, significant impact on the California Supreme Court’s consideration of those cases.

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