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NLRB Asks Fifth Circuit to Rehear Horton; Panel Split Over Board View on Class Waivers

Monday, March 17, 2014

By Lawrence E. Dubé  

March 14 --The National Labor Relations Board filed a petition March 13 asking the U.S. Court of Appeals for the Fifth Circuit to rehear and reverse a 2-1 panel decision rejecting the NLRB's position that class and collective action waivers in an employer's mandatory arbitration policy interfere with employee rights under federal labor law (D.R. Horton Inc. v. NLRB, 5th Cir., No. 12-60031, petition for rehearing 3/13/14).

The NLRB asked for a panel or en banc rehearing of the December 2013 decision that denied enforcement of a board order finding that homebuilder D.R. Horton Inc. violated Section 8(a)(1) of the National Labor Relations Act. The board held that the company illegally maintained and enforced a mandatory arbitration agreement that waived the rights of employees to participate in class or collective actions concerning their employment-related claims.

Calling the issue “exceptionally important,” the NLRB argued in the petition that the panel majority misconstrued the effect of U.S. Supreme Court decisions in several non-labor cases and failed to recognize that the “distinctive character” of the NLRA is its guarantee of protection for employees who act in concert for their mutual aid or benefit.

Panel Blocked NLRB Ruling on Waivers

In January 2012, NLRB Chairman Mark Gaston Pearce (D) and then-Member Craig Becker (D) decided that Horton's mandatory arbitration procedure violated Section 8(a)(1) of the NLRA because it interfered with the statutory right of employees to engage in “concerted activity” for their mutual aid or protection (357 N.L.R.B. No. 184, 192 LRRM 1137 (2012); 5 DLR AA-1, 1/9/12). Brian E. Hayes (R), the only other board member at the time, was recused and did not participate in deciding the case.

The panel 2-1 rejected the NLRB's view that maintaining the arbitration agreement was an unfair labor practice (D.R. Horton Inc. v. NLRB, 737 F.3d 344, 197 LRRM 2637, 2013 BL 335349 (5th Cir. 2013); 233 DLR AA-1, 12/3/13).

Writing for the majority with Judge Carolyn Dineen King, Judge Leslie H. Southwick said the NLRB “did not give proper weight to the Federal Arbitration Act,” which made the agreement enforceable. The National Labor Relations Act, which protects the right of employees to engage in concerted activity, “should not be understood to contain a congressional command overriding the application of the FAA,” Southwick wrote.

Southwick said the NLRB contends “the NLRA is essentially sui generis,” arguing “[t]hat act's fundamental precept is the right for employees to act collectively.”

But the panel majority said “there are numerous decisions holding that there is no right to use class procedures under various employment-related statutory frameworks.”

The panel denied enforcement of the board's ruling that the arbitration agreement violated Section 8(a)(1) of the act. Judge James E. Graves dissented from the panel ruling on the issue.

High Court Rulings Called Not Determinative

In its petition for rehearing, the NLRB wrote that rehearing “is warranted on this exceptionally important issue because the panel majority erred in finding Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 55 FEP Cases 1116 (1991), and AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 2011 BL 110648 (2011), determinative of this case.”

The two Supreme Court decisions did not address or decide “the distinct NLRA issue presented here,” the petition argued.

The NLRB said the Fifth Circuit panel majority acknowledged that it owed some deference to the board's interpretation of employee rights under the federal labor law, but it failed to give any effect to the board's analysis that the right to engage in concerted activity through class or collective action is a “core right” under the NLRA.


“The distinctive character of the NLRA--in contrast to individual rights statutes like the ADEA or the FLSA--is that it does vest employees with a substantive right to act in concert to protect their interests as employees,” the board wrote in its petition.  

 


The majority found that Gilmer and Concepcion were controlling, but the NLRB wrote that the cases did not raise issues concerning NLRA rights or employees' concerted activity, and they were therefore not determinative of the dispute before the Fifth Circuit.

Petition Argues Concerted Activity as Substantive Right

The NLRB argued that courts have determined that the rights of employees under some other statutes, including the Age Discrimination in Employment Act and the Fair Labor Standards Act, do not include substantive rights to proceed through collective action and do not override the Federal Arbitration Act's support for the enforcement of private arbitration agreements. However, the board argued, the NLRA is different.

“The distinctive character of the NLRA--in contrast to individual rights statutes like the ADEA or the FLSA--is that it does vest employees with a substantive right to act in concert to protect their interests as employees,” the board wrote.

Arguing that collective actions are an alternative to other forms of protests like strikes that are protected by the National Labor Relations Act, the NLRB said “collective action of this sort seeks to unite workers generally and to lay a foundation for more effective collective bargaining.”

Sanctioning the enforcement of D.R. Horton's arbitration agreement “would strip that collective right away by denying employees their NLRA right to litigate their work-related claims on a collective basis in any forum, whether arbitral or judicial,” the NLRB said.

Fifth Circuit rules do not permit other parties to an appeal proceeding to respond to a petition for rehearing unless ordered by the court to do so.

NLRB attorneys Ruth E. Burdick and Kira Dellinger Vol filed the petition for the board.

 

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com


Text of the petition is available at http://www.bloomberglaw.com/public/document/DR_Horton_Incorporated_v_NLRB_Docket_No_1260031_5th_Cir_Jan_13_20/8.

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