The National Labor Relations Board continues to hold that arbitration clauses precluding class actions by employees against their employer are unlawful despite a court ruling overturning the Board’s decision.
Employees of a New Jersey limousine company filed suit against their employer in the U.S. District Court for the District of New Jersey alleging that they were underpaid in violation of the Fair Labor Standards Act and state laws. These types of lawsuits are extremely popular across the country. The employer moved to dismiss the lawsuit and cited for support the employees’ signatures on agreements that they would not join in any class or collective claims or “jointly bring any claim” against the company. The NLRB said that maintaining and enforcing the class and collective action waivers was an unfair labor practice under the National Labor Relations Act.
A few years ago, the NLRB held in D.R. Horton Inc. that a complete ban on collective action interfered with employees’ NLRA-protected right to engage in concerted activity for their mutual aid or protection. The U.S. Court of Appeals for the Fifth Circuit disagreed with the NLRB and overruled its decision.
Unfortunately for employers, the NLRB’s decision is precedent at the NLRB level and Administrative Law Judges are required to ignore the court decision and follow the Board decision until the United States Supreme Court rules otherwise. So all companies who have an arbitration policy in their handbook prohibiting employees from suing the company in a class or collective action will lose at the Board level but likely win on appeal at the U.S. District Court level. Only if different District Courts rule differently on the issue will the U.S. Supreme Court get involved to settle the matter – but that would occur years from now, if ever.