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Employers with Mandatory Arbitration Agreements Advised to Review Their Policies

If you are an employer that maintains a mandatory arbitration agreement that waives the rights of employees to participate in class or collective actions, your arbitration agreement may be in violation of the National Labor Relations Act (“NLRA”).

Pursuant to the National Labor Relations Board’s (“NLRB”) recent decision in D.R. Horton, Inc., 357 NLRB. No. 184 (2012), a case of first impression for the NRLB, “mutual arbitration agreements” that preclude the arbitrator from hearing class or collective actions violate Section 8(a)(1) of the NLRA.  The NLRB determined, despite Supreme Court decisions that many believed held otherwise, that such arbitration agreements “clearly and expressly bar employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.” 

Prior to the case, the position of former NLRB General Counsel Ronald Meisburg was that class action waivers were not unlawful so long as the waiver provided that employees could act together to challenge the waiver itself. 

However, with the NLRB’s decision in D.R. Horton, Inc., the new rule for employers is clear – employers may not compel employees to waive the ability to collectively pursue litigation of employment claims in all forums, arbitral and judicial.  Instead, while arbitration agreements may continue to bar employees from classwide arbitration, they may not also prohibit employees from a judicial forum for class and collective claims.

Employers favor mandatory arbitration provisions in employment agreements because arbitration is generally quicker and less expensive than court litigation.  However, if the mandatory arbitration provision prohibits employees from pursuing class or collective actions in all forums, the employer should revise the policy in light of recent legal developments.

For more information, please contact the law offices of Berchem, Moses & Devlin, P.C.