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Three Strikes, You’re Out: Fifth Circuit Again Invalidates NLRB’s Anti-Class Action Waiver Policy
Posted on Categories Arbitration Agreements, Court Decisions, Non-Securities Arbitration, RegulationTags , ,

For the third time, the Fifth Circuit has rejected the National Labor Relations Board’s (“NLRB”) view that use of class action waivers in predispute arbitration agreements (“PDAAs”) violates the National Labor Relations Act (“NLRA”).

In a tidy, two-page, unpublished per curiam ruling, the Court in Citi Trends, Inc. v. NLRB, No. 15-60913 (5th Cir. Aug. 10, 2016), finds that it must follow precedent established by the Circuit. Says the Court: “The Board concedes, as it must, that its order contravenes our published decisions in D.R. Horton, Inc. v. NLRB, [737 F.3d 344 (5th Cir. 2013)] and Murphy Oil USA, Inc. v. NLRB, [808 F.3d 1013 (5th Cir. 2015)] which hold that ‘an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions and requiring employment-related claims to be resolved through individual arbitration.’ Although the Board asks us to reconsider our holdings in D.R. Horton and Murphy Oil, this Court is bound by its prior published decisions” (footnotes omitted).

SCOTUS Showdown Looming?

There is a definite split in the Circuits. At issue is whether PDAAs with class action waivers violate Section 8(a)(1) of the NLRA because they interfere with the employees’ statutory right to “concerted activities” protected by section 7. The Horton Court held: “[t]he NLRA should not be understood to contain a congressional command overriding application of the FAA [Federal Arbitration Act]. The burden is with the party opposing arbitration, Gilmer, 500 U.S. at 26, 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.” In May, however, a unanimous Seventh Circuit Panel in Lewis v. Epic Systems, Inc., No. 15-cv-82-bbc (7th Cir. May 26, 2016), held that an arbitration clause in an employment agreement containing a class action waiver violated the NLRA and was unenforceable. Just a week later, a unanimous Eighth Circuit Panel in Cellular Sales of Missouri LLC v.  NLRB, Nos. 15-1620 & 15-1860 (8th Cir. June 2, 2016), held that enforcing the PDAA is permitted by the NLRA, but the PDAA’s chilling effect on filing unfair labor charges is not. Citing Horton, Murphy Oil and its own holding in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013), the Court concluded that “Cellular Sales did not violate section 8(a)(1) [of the NLRA] by requiring its employees to enter into an arbitration agreement that included a waiver of class or collective actions in all forums to resolve employment-related disputes.”

(ed: *As we have previously predicted, sooner or later this issue will end up before SCOTUS. If ever an issue cried out to be harmonized, this, in our view, is one. Whether NLRB seeks cert. remains to be seen. A 4-4 split would have the effect of letting stand the Fifth Circuit’s decision. **The Opinion bears a legend “Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.”) (SAC Ref. No. 2016-31-05)

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