NLRB's D.H. Horton case rejected by the 5th Circuit

Federal Arbitration Act trumps the NLRB. The NLRB held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that, among other things, prohibited an employee from pursuing claims in a collective or class action. The 5th Circuit disagreed in a 2-1 decision and concluded that the Board’s decision did not give proper weight to the Federal Arbitration Act. D.R. Horton, Inc v. NLRB (5th Cir 12/03/2013). The court upheld the Board, though, on requiring Horton to clarify with its employees that the arbitration agreement did not eliminate their rights to pursue claims of unfair labor practices with the Board.

Horton required all employees to sign a Mutual Arbitration Agreement which provides that

  1. Horton and its employees "voluntarily waive all rights to trial in court before a judge or jury on all claims between them."
  2. "all disputes and claims" would "be determined exclusively by final and binding arbitration," including claims for "wages, benefits, or other compensation."
  3. "the arbitrator [would] not have the authority to consolidate the claims of other employees" and would "not have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding."

The NLRB ruled that Horton committed an unfair labor practice because it required employees to waive their right to maintain joint, class, or collective employment related actions in any forum. The Board said this interfered with employees' Section 7 rights to "engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection."

The 5th Circuit, however, held that the Federal Arbitration Act prevents this outcome. As the court put it, "Requiring a class mechanism is an actual impediment to arbitration and violates the FAA." The court found nothing in the NLRA or its legislative history that indicated a congressional intent to override the FAA.

On the other hand, the court did uphold the NLRB's conclusion that Horton violated the NLRA because an employee would reasonably interpret the Mutual Arbitration Agreement as prohibiting the filing of a claim with the Board.