When Arbitration Agreements Violate The National Labor Relations Act

The NLRB continues to assert its position that arbitration agreements that prohibit class action lawsuits violate the NLRA.  Under D.R. Horton, Inc., 357 NLRB No. 184 (2012), the Board held that an arbitration agreement that prevents employees from filing a collective claim to address wages, hours or working conditions violates the NLRA.  In other words, class action lawsuits constitute "concerted activity" protected under section 7. 


Following D.R. Horton precedent, in an opinion issued October 23, an Administrative Law Judge ("ALJ") ordered an employer to cease maintaining a mandatory arbitration agreement that employees could construe as prohibiting class or collective actions.  (Concord Honda, Case No. 32-CA-072231.)   


Concord Honda required applicants to sign an arbitration agreement as a condition of employment.  It required that all disputes be subject to arbitration, except for claims arising under the National Labor Relations Act, claims for benefits under the California Workers' Compensation Act, and claims made to the California Employment Development Department (disability and unemployment).   The union contended that this mandatory arbitration agreement violated section 7 of the NLRA which guarantees employees the right to engage in concerted activities. 


The ALJ determined that employees could construe the agreement as permitting individual arbitration actions only, thus violating the NLRA.  The ALJ recognized that the arbitration agreement did not specifically exclude joint or collective arbitration actions.  Moreover, the arbitration agreement incorporated the California Arbitration Act, which includes a provision for the consolidation of arbitration claims, Code of Civil Procedure section 1281.3.  Further, the company did not use the arbitration agreement to restrict collective activities. 


However, the arbitration agreement did not specifically cite to section 1281.3.  Nor did the agreement make reference to an employee's right to join with others in arbitration.  Moreover, the language of the agreement focused on resolving the dispute between the company and the employee.  Finally, the ALJ concluded that the company enforced the agreement to prevent the resolution of employee disputes via a class action lawsuit. 


The D.R. Horton case has been criticized as contradicting Supreme Court precedent favoring arbitration, including AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).  The D.R. Horton case is currently before the Fifth Circuit Court of Appeals.