In a 2-1 decision, the U.S. Court of Appeals for the Fifth Circuit (which does not include Connecticut) held on Tuesday that the NLRB erred in disallowing an employer’s mandatory arbitration agreement that waived the rights of employees to participate in class actions.
The decision in D.R. Horton v. NLRB (download here from Bloomberg Law) has long been anticipated by employers. Indeed, when I wrote about the NLRB’s original decision in January 2012, I cautioned employers not to rip up their mandatory arbitration agreements just yet.
While the decision doesn’t directly impact employers in Connecticut, the decision is important because it removes an argument that the NLRB has been using for the last few years. Indeed, the Second Circuit (which covers Connecticut and New York) recently affirmed the right to use mandatory arbitration agreements with class action waivers as well.
The decision in D.R. Horton boiled down to whether the Federal Arbitration Act was given the “proper weight”. The Fifth Circuit concluded that the National Labor Relations Act “should not be understood to contain a congressional command overriding the application of the FAA”.
Without a split in the circuits on this issue, it is quite possible that this is the last of this issue for some time. Employers who are looking to reduce risk ought to get advice from their legal counsel about whether mandatory arbitration agreements may be right for their business.
Indeed, the court did find that the arbitration agreement here could be understood by employees to preclude them from bringing unfair labor practice claims to the NLRB and upheld the NLRB’s order to the employer that the document be revised. So caution is still strongly encouraged before implementing such arrangements.