Fifth Circuit rules against NLRB, favoring arbitration

NEW ORLEANS – The Fifth Circuit Court of Appeals overturned a ruling by the National Labor Relations Board (NLRB) finding an arbitration agreement between a company and its employees disallowing collective suits acceptable.

D. R. Horton Inc. had sued the NLRB pursuant to the Board’s ruling that Horton’s arbitration agreement with its employees violates the National Labor Relations Act (NRLA).

The Fifth Circuit disagreed with the Board’s ruling upon consideration of the Federal Arbitration Act (FAA), but has upheld the Board’s requirement that Horton revise or rewrite the agreement in order to clarify employees’ rights.

Horton, a home building company, began requiring the Mutual Arbitration Agreement be signed by all of its employees in 2006. The agreement asks employees to waive their rights to trials before a judge or jury and collective or class action law suits, and would instead bind them to individual arbitration.

Upon review of the agreement, the Board determined that Horton should revise or rewrite the agreement in order to clarify for its employees that they are allowed to file charges and seek resolution as a group. Horton appealed this decision.

The court considered Horton’s arguments that one board member’s appointment had expired at the time of the Board’s decision, that the Board’s three-member panel lacked full authority, and that the decision conflicted with the Federal Arbitration Act.

It found that the Board’s decision did indeed violate the FAA and held that “the NRLA does not explicitly provide for such a collective action” so that “there is no basis on which to find that the text of the NLRA supports a congressional command to override the FAA.” Furthermore, the court ruled that allowing employees the ability to file claims collectively would actually “disfavor arbitration.”

The appeals court granted Horton’s move to review the Board’s decision, but enforced the Board’s order for revision “because an employee would reasonably interpret the Mutual Arbitration Agreement as prohibiting the filing of a claim with the Board.”

Dissenting Judge Graves states that he would deny Horton’s petition for review and stood in full agreement with the Board’s decision.

The case was heard by Circuit Judges Carolyn Dineen King, Leslie H. Southwick and James E. Graves Jr.

Case no. 12-60031.