Fifth Circuit Upholds Arbitrations with Class Waivers – Gasses NLRB in Murphy Oil Case
More frequently, employers are turning to arbitration agreements to keep lawsuits out of court and prevent the threat of run-away juries. Many arbitration agreements also contain class action waivers which require employees to bring any claims individually and not as a multi-party or class action. Federal courts have routinely upheld arbitration agreements with class waivers; however, the National Labor Relations Board (NLRB), has taken a very different position, holding that arbitration agreements with class waivers violate Section 8 of the National Labor Relations Act (NLRA), which provides that an employer commits an unfair labor practice if it interferes, restrains or coerces employees in the exercise of their right to engage in concerted protected activity.
In a case involving homebuilder D.R. Horton, the United States Court of Appeals for the Fifth Circuit rejected the NLRB’s position, holding that an employer could enforce an arbitration agreement with a class action waiver without violating the NLRA. Despite this ruling, in a recent case involving Murphy Oil, the NLRB ignored the Fifth Circuit’s D.R. Horton decision and held that Murphy Oil’s class action waiver violated the NLRA. Murphy Oil appealed to the Fifth Circuit.
This week, in Murphy Oil USA v. National Labor Relations Board, the Fifth Circuit again rejected the NLRB’s position, holding that an employer could enforce an arbitration agreement with a class action waiver without violating the NLRA. The decision included a caveat—the NLRB could require such agreements to have a provision advising employees that they were not prevented from filing an administrative charge.
What does this mean for employers?
First, it means that the NLRB, as currently constituted, will do everything in its power to rule in favor of employees, even if that ruling conflicts with controlling precedent. Employers should consider what the NLRB might hold when crafting any policies or agreements—this applies to union and non-union employers alike. Second, this ruling shows that arbitration agreements and class action waivers can be powerful tools for employers, but they must be carefully worded to avoid creating additional litigation and cost. Given the Fifth Circuit’s decision, class action waivers should include a statement that the arbitration agreement does not prohibit employees from filing administrative claims. Finally, this ruling shows that employers should not hesitate to challenge an adverse ruling from the NLRB or any other federal agency. While federal agencies have become increasingly aggressive, the courts seem to recognize that agencies are pushing the envelope and may afford them less deference as a result.